Bob Barker premiered as the host of the new TV game show The Price Is Right in September 1972. He held this position for 35 years until June 2007. Drew Carey was named his replacement in August of that year and has served as host since then. However, I will always equate the show with its original host. The show premiered when I was in second grade, and I remember watching it regularly during Christmas break and summer vacations. The show was filled with overly excited contestants trying their hand at games such as Lucky 7, High Low, or Plinko. As someone who liked math, I always enjoyed trying to guess the prices or add up the value of the showcases at the end of the show.
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Unfortunately, over the last couple of years, many US consumers have felt that the price is NOT right. This is due to inflation rising in 2022 and 2023 at the fastest pace we have seen in nearly 40 years. After a long-delayed response to rising prices, the Federal Reserve Bank finally began raising interest rates aggressively in 2022. Cumulatively, the Fed raised rates 11 times, for a total of 5 1/4%, from March 2022 to July 2023. They have left rates at that elevated level for nearly a year.
As you can see in the chart above, the consumer price index (CPI) fell from its peak of 9.1% in June 2022 to 3.0% in June 2023. However, since then, the rate of inflation once again accelerated to 3.7% before eventually falling back to 3.3%, where it stands today. Inflation staying stubbornly above the Fed's 2% target has not allowed them to cut interest rates as they had originally telegraphed to the markets in December ‘23.
It's crucial to understand that even if the rate of inflation, or future price growth, stabilizes, it doesn't erase the previous price increases that have already been absorbed into the goods and services consumers purchase. This is causing significant stress and frustration among Americans, particularly those in the lower 3/4 of the US income and wealth spectrum. Despite reassurances from economists and politicians about the downward trajectory of inflation, consumers can see for themselves that the prices on the shelf are still significantly higher than they were just a few years ago. The difference between higher prices and a moderating rate of inflation is something that consumers are keenly aware of.
You see, the price of many things that families buy has grown faster than their incomes have grown over the last several years. This means that even though they have gotten raises and wage increases, it is buying less groceries, gasoline, and other necessities than they did before. We can see this illustrated in the chart below from our friends at Axios that tracks hourly wages for non-managers against a basket of fast-food prices, which is something many families in this age group consume regularly.
It appears that this is leading families who still consume fast food to have more Unhappy Meals. Higher prices on things that consumers buy on a regular basis tend to lead to frustration and economic pessimism, as we have seen in recent consumer sentiment surveys. We know that higher prices disproportionately affect lower-income households, many of which are dealing with rising rents and the inability to qualify for a mortgage or to buy a home.
In regular conversations with our clients who are at or near retirement age, we hear consistent messages that many of their children or grandchildren are struggling with these issues today. They are uncertain about how to manage their cash flow and resources to help them have the same sort of bright financial future that their parents have enjoyed.
If you have a friend or loved one who is dealing with these issues and uncertainties in today's economy, we want to remind you that the CFPs of Impel Wealth Management are here and available to help them. Please pass this message along to them and encourage them to reach out.
We believe that the financial planning process can help young families chart a course towards a more confident future where The Price is Right, and meals are happy. This is our goal and our mission as we continue “Moving Life Forward.”
© 2024 Jesse Hurst
Senior Wealth Advisor and CEO
The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
Investors cannot directly invest in indices.
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