Economic charts for your beach reading

July 19, 2024

It's a data-driven world, we just live in it. Before you retire to your August vacations, time to look at some charts.

Markets spent the first half of 2024 riding a wave of optimism. But peeling back the onion reveals an interesting trend. Per-share earnings of the S&P 500 are lower today than they were in the fourth quarter of 2021, almost two and a half years ago. And that *does not* include inflation, which was roughly 20% over that time period, meaning that real earnings are down more than 20%. (Remember that inflation tends to give corporate earnings a tailwind.)

If you look at earnings estimates for the S&P 500 though, analysts are optimistic that a steady increase is coming. Markets base their current prices on future results.

The news on inflation is generally good. We graphed the two primary inflation metrics for you below (via CPI-U). The Fed's inflation target remains at 2%, and progress toward that goal continues:

The Consumer Confidence Index remains relatively high. This metric tends to reflect what happened. It serves as a historical look-back. It's not predictive of what is going to happen.

The unemployment rate is steadily rising. The Federal Reserve is watching this closely as unemployment has a history of going quickly from a steady rise to a quick spike. From Fed data:

And credit card delinquencies are rising to 10-year highs across all age groups, which shows spending power on the decline:

Finally, on the stock market side of things, here's an incredible stat. From January of 2023 to July of 2024, the seven big tech firms of the S&P 500 are up over 140%. The other 493 remaining firms, also weighted by market capitalization in the graph below, are up about 25%. Keep in mind that investors cannot predict when mean reversion will begin, but that historically it has been a powerful force.

We have an economic slowdown, which markets wanted. Whether we will have too much of a slowdown is unclear. Analysts peg the overall chances of a U.S. recession at 30%.

Dan Cunningham

1. The Consumer Confidence Index is a trademark of The Conference Board.
2. Additional Chart Sources: Operating earnings: S&P Global / CPI-U: Bureau of Labor Statistics / Unemployment Rate: Bureau of Economic Analysis