Introduction

Ten years into the longest economic recovery in the history of the United States, investors are becoming increasingly concerned about a downturn. Along with the late cycle, trade tensions, stagnating corporate margins, and a Federal Reserve with limited tools in its coffers are legitimate reasons for a higher degree of caution. The consensus view however is that the consumer is in great shape, and since that sector represents two-thirds of the economy, we have less to fear.

While we agree that the US consumer in aggregate appears to be in better shape relative to 2007, the emergence of the “Asset Light Consumer” – with respect to the consumer balance sheet as well as consumer purchases has created new vulnerabilities and altered the landscape for investment. The Great Recession, technological disruption, demographics, and the rise of the services sector have led to the rapid growth of a rentership and sharing economy, which has long term implications for growth and investing. Consumers now own fewer assets and allocate more of their income to experiences over things. Furthermore, the shift to a services economy has led to a reduction in many traditional forms of corporate investment in favor of the software and equipment needed to support consumer demand. Herein we will examine the impact of these shifts and identify potential opportunities.

• In Section I, we present our diagnosis of the health of the consumer.
• In Section 2, we disaggregate this view by looking at the profile of renters versus owners.
• In Section 3, we delve into some of the drivers of the rentership and sharing economy by examining the housing, automobile, and apparel markets.
• We conclude in Section 4 with thoughts on implications for investors.

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https://www.kkr.com/global-perspectives/publications/new-consumer