Satiating Consumer Spending, Housing and Rent Inflation, and the “Magnificent 8”
November 18, 2021 | FIRESIDE CHARTS
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Consumer spending, the pandemic and inflation. What will consumers do? The US dollar rally may help curb imported inflation of goods, but our own housing and rent inflation will overwhelm this beneficial effect. How many stocks make up 30% of the market cap of the S&P 500? Are fund managers taking on too much risk? Our nations debt and the effect a mere 1% rise will do to our budgets…
1. I disagree with the headline. Consumers are still making up for the lack of spending for the past 20 months due to the pandemic. Once this pent-up demand is satiated, if inflation continues to rise, consumers will buy as fast as they can as delays will simply bring higher prices:
Source: ING
2. After a double bottom, the USD continues to strengthen which should help ease some of the import price increases:
Source: Thechartstore.com from 11/12/2021
3. Despite some of the worst buying conditions on record (high prices, insane demand, mortgage rates edging higher), demand for housing is still at extremes:
Source: Redfin
4. Equivalent rent accounts for 42% of the CPI index:
Source: CoreLogic
5. Despite record demand and record permits, labor and material shortages have caused housing starts to decline to below pre-Covid levels:
:
Source: Mizuho Securities USA
6. Is Europe going to be the first economy to get back to pre-Covid levels?
Source: The Chart Store, from 11/14/21
7. When 8 tech stocks make up 30% of the S&P 500 index, it is fair to cite over-concentration. About the same number dragged the S&P 500 higher in 1999…
Source: Yardeni Research
8. Fund managers are taking on significant additional equity risk. Will this exacerbate the next downturn?
Source: BofA Global Research
9. Before the infrastructure bill and the build-back-better bill, the U.S. debt is ~$30 trillion. A 1% rise in interest rates will bring an additional $300 billion of debt each year.
Source: The Daily Shot from 11/18/21
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.