In today’s post, we:
- Recap the past few months.
- Consider what may lie ahead.
- Explain why prices continue to be high at grocery stores.
- List more affordable grocery stores than Market Basket.
It appears market volatility is on summer vacation.
The last six months have gone unexpectedly well. The S&P is up 17% since January 1, 2023.
This positive performance has surprised many, including 44 out of 46 surveyed financial analysts who earlier this year predicted the markets would continue to decline. Thankfully, they were mistaken.
Remarkably, almost all of this increase is attributed to seven companies, aka the Magnificent 7, including: Apple, Microsoft, Amazon, Nvidia (computer component manufacturer), Tesla, Alphabet (Google) and Meta (Facebook/Instagram/Threads).
What’s more, a great deal of the increase is due to expectations around ChatGPT, an artificial intelligence chatbot. The AI program launched in November 2022 and attracted 100 million users within two months, the fastest-growing user base until the recent launch of Threads, a new social network owned by Meta. (Threads surpassed 100 million users in less than a week.)
If you try ChatGPT, remember not to share any personal or proprietary information. Also, be aware of these six risks for businesses (many apply to individuals as well).
Looking Ahead
We’re closely monitoring whether or not the Fed will raise interest rates again.
(Update: The Fed hiked interest rates by a quarter point on 7/26/23)
Fed hikes often lead to reduced consumer spending, resulting in lower corporate earnings and falling stock prices.
Since March 2022, the Fed has raised rates 10 times to help slow inflation. The current Fed Funds Rate is about 5.25%. A year ago, it was only 1.75%.
Mortgage seekers in particular are experiencing the negative impact of rising rates.
Inflation Cools
Inflation is down around 3% versus 6.4% this past January. Besides the rate hikes, lower energy prices and fewer supply chain interruptions are key factors reducing inflation.
While there may be other hikes later this year, we believe the rate-hike cycle will end soon given key economic indicators, including strong consumer spending and employment trends. Also, consumers are stockpiling cash, about $6 trillion!
(Remember, if you’re holding a lot of cash, reach out. There are several good options to put your cash to work, while also maintaining liquidity.)
Grocery Stores & Inflated Pricing
We found an interesting article explaining why prices continue to be high at grocery stores.
According to the article, production costs for food manufactures have gone up mostly due to increased transportation, packaging and wage increases.
However, ingredient prices have been declining for months, while grocery bills are still up.
What gives? Basically, food manufactures are focused on profits, e.g., one food manufacturer’s net income was up 39% year over year.
Overall, we need to be creative and selective while food shopping. This article has some good ideas for saving on your next grocery bill, including encouraging us to shop at different locations.
Food Pricing Lower Than Market Basket
To test the shop-elsewhere idea, we came across this price survey reporting the following:
ALDI’s prices were 41% lower than the all-store Market Basket average. Also, although its prices were higher than ALDI’s, Trader Joe’s still offered savings compared to most grocery stores in the area. Its prices were about 31% lower than Whole Foods, 30% lower than Wegmans, 28% lower than Star Market, 26% lower than Shaw’s, 22% lower than Stop & Shop, 15% lower than Target, 5% lower than Market Basket and 4% lower than Walmart.
Keep in mind, ALDI and Trader Joe’s offer mainly their own brands. Still, if it’s healthy and tastes good, why not save?
Have you discovered any successful grocery-saving strategies? If so, we’d love to hear about it.
Comments or Questions
Your comments and questions are always encouraged. Please reach out anytime.
–David Bunker, Financial Advisor & Fiduciary
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