My local coffee shop finally gave in... A little sign near the register said "We apologize. Due to the price of eggs, we have updated the prices of some of our menu items."
The Truth About Americans' Disposable Income
By Vic Lederman, editorial director, Chaikin Analytics
My local coffee shop finally gave in...
A little sign near the register said "We apologize. Due to the price of eggs, we have updated the prices of some of our menu items."
Obviously, we've been hearing about the price of eggs for a long time now. And just like you probably have, I've seen egg prices creep up at the grocery store.
That said, I'll admit that I'm not a particularly price-sensitive buyer...
The price usually plays into my decision-making only if I'm "getting a deal." Or in some cases, if the price is so high that it offends my sensibilities.
But for millions of Americans, price matters... a lot.
In fact, many folks check their bank accounts before going to the grocery store. They need to make sure they don't overdraw their accounts.
And, as I'm sure you've noticed, the news media spends a lot of time on their plight.
Now, I don't mean to downplay the hardships these folks face. Across the country, millions of folks are struggling.
But today, let's look at the aggregate numbers around disposable income. As I'll explain, they might surprise you...
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Today, we're looking at data from the U.S. Bureau of Economic Analysis ("BEA"). It's one of the many arms of the federal government that help us keep tabs on how America is doing.
And the BEA collects a lot of data.
We'll start by looking at a raw number – disposable personal income.
This is income after taxes. So, it's not "disposable" in the sense that you probably think of it. Instead, it's how much money Americans have to spend in general.
Take a look at this chart of disposable personal income over time...
First, notice that disposable personal income is at all-time highs. Additionally, you can see that the stimulus payments during the COVID-19 pandemic created a major distortion.
But this chart doesn't include something that's darn important...
I'm talking about inflation.
Fortunately, the BEA provides us with inflation-adjusted data. Take a look at this next chart...
This time, I've zoomed in. And the chart starts at the end of 1989.
Seen this way, the pandemic distortion becomes even clearer. It's obvious that the payments the government made during that time were huge.
They dramatically changed the state of Americans' after-tax income. And you also see that we're no longer at all-time highs.
Looking at this data, we see simply that the effects of inflation are very real. But as I see it, that spike is the bigger problem...
Remember that many Americans are facing real financial hardship out there. But in aggregate, disposable income (adjusted for inflation), is still growing.
Unfortunately, for many Americans, it still doesn't feel like it. That's especially true for lower-income folks.
Put simply, the stimulus payments during the pandemic created a "sentiment bubble."
For the first time, millions of Americans had extra cash on hand. They went from living paycheck to paycheck... to having some true disposable income.
Despite the growth in so-called "real disposable income," we're still not above that high-water line. And that feels terrible.
Combine that with soaring costs of living, and you have a recipe for discontent.
It's going to take time for Americans to break free of the pandemic-era disposable income anchor. And until then, we're going to continue to see widespread economic frustration.
Put simply, sentiment matters.
Good investing,
Vic Lederman
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.09%
7
18
5
S&P 500
-0.46%
72
311
115
Nasdaq
-1.18%
25
64
11
Small Caps
-0.72%
292
1138
473
Bonds
+0.29%
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks remain somewhat Bearish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Staples
+2.26%
Health Care
+1.95%
Energy
+0.98%
Utilities
+0.97%
Real Estate
+0.86%
Financial
-1.6%
Communication
-1.98%
Materials
-2.09%
Industrials
-2.41%
Information Technology
-3.53%
Discretionary
-4.15%
* * * *
Industry Focus
Semiconductor Services
3
27
10
Over the past 6 months, the Semiconductor subsector (XSD) has underperformed the S&P 500 by -4.03%. Its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #15 of 21 subsectors and has moved down 4 slots over the past week.
Indicative Stocks
WOLF
Wolfspeed, Inc.
INDI
indie Semiconductor,
MCHP
Microchip Technology
* * * *
Top Movers
Gainers
WBA
+6.5%
NKE
+4.94%
WST
+4.82%
EL
+4.6%
CRL
+4.59%
Losers
WDC
-28.65%
PLTR
-10.53%
SMCI
-7.95%
LW
-6.29%
CEG
-5.88%
* * * *
Earnings Report
Earnings Surprises
O Realty Income Corporation
Q4
$0.22
Missed by $-0.17
CTRA Coterra Energy Inc.
Q4
$0.49
Beat by $0.06
FANG Diamondback Energy, Inc.
Q4
$3.64
Beat by $0.26
ZM Zoom Communications Inc.
Q4
$1.41
Beat by $0.10
OKE ONEOK, Inc.
Q4
$1.57
Beat by $0.09
* * * *
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