Why high interest rates actually might be helping US consumers, strategist says

• High interest rates actually might be helping US consumers, Carson Group strategist Ryan Detrick said.
• While interest payments for Americans have jumped, they've been offset by a jump in interest income in money market accounts.
• "It is estimated there is more than $6 trillion in money markets currently and most of those accounts are earning close to 5%," Detrick said.

Soaring interest rates have hit US consumers hard. Mortgage rates are at multi-decade highs and credit card delinquencies are on the rise.

But there's another side of that story that warrants more attention, involving money-market funds, a Carson Group strategist said. 

"I want to take the other side of higher rates and that is savers are finally being rewarded," Ryan Detrick, chief market strategist, wrote in a blog post. "It is estimated there is more than $6 trillion in money markets currently and most of those accounts are earning close to 5%. That right there is a plus side to higher rates."

That doesn't mean consumers aren't feeling any pain at all. Interest payments have surged as Americans simply pay more for any amount they borrow (an annual rate of about $573.4 billion today versus $241.5 billion three years ago).

But high interest rates do mean that savers are seeing higher rates of return. For those US consumers who do have cash, they are being rewarded "like no time over the past few decades," Detrick said.

By the numbers, US personal interest income has jumped to an annual rate of $1.83 trillion last month as opposed to $1.5 trillion three years ago. Which boils down to one key takeaway, Detrick said: the jump in interest payments were virtually offset by the jump in interest income.

Detrick also cited data from Ritholtz Wealth Management that shows household assets have grown more than household liabilities since 2020. Which again pushes back against the idea that consumers are being walloped by high interest rates, drowning in debt.

That being said, it's a sunny story for a specific type of US consumer.

"We are aware this isn't an ideal backdrop for everyone, as many are struggling," Detrick said. "But the truth is if you've owed stocks and a house the past decade or more, are college educated, and willing to work hard, then your net wealth is likely near all-time highs and these are the people who likely move the needle on the economy."