We need a little Thanksgiving We need a little Thanksgiving http://www.federatedhermes.com/us/static/images/fhi/fed-hermes-logo-amp.png http://www.federatedhermes.com/us/daf\images\insights\article\thanksgiving-dinner-party-small.jpg November 25 2022 November 23 2022

We need a little Thanksgiving

But it's a lot more expensive this year.

Published November 23 2022
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It’s been a brutal year for investors, with the S&P 500 down 27.5% from its peak and benchmark 10-year Treasury yields soaring from 1.5% to 4.25%. Inflation hit a 41-year-high 9.1% in June, the Federal Reserve is hiking interest rates at its fastest pace since Paul Volker and the U.S. economy appears to be on a glide path into recession at some point over the next two years. In Washington, it’s Groundhog Day with yet another contentious midterm election ending in a Georgia Senate run off on Dec. 6, although voters did orchestrate divided government and legislative gridlock by flipping the House.  

So, with apologies in advance to the legendary Broadway musical “Mame,” it seems like we all need a little Thanksgiving, right this very minute. It’s been a tough year, to be sure, and like the show’s signature song says, we’ve all grown a little leaner, colder, sadder and older. Instead of wallowing in our woes, let’s gratefully reflect on our many blessings and share a great meal with our family and friends. We’ll get through this because we always do. However distant, there’s a light at the end of the proverbial tunnel.   

Tuesday is “Giving Tuesday” and Thanksgiving is a great time to remember those of us who are less fortunate. Please volunteer at a homeless shelter, donate to a food bank or participate in a Thanksgiving food drive at your local church or community center. Charity is a terrific way to celebrate the season, and the warm glow of generosity will help to melt our concerns.

Happy Thanksgiving, everyone!

Travel forecast--crowded The American Automobile Association (AAA) predicts that 54.6 million people will travel at least 50 miles away from their homes over the five-day Thanksgiving holiday weekend by car, plane, train, bus or cruise ship, up 1.5% from 2021. That’s 98% of pre-pandemic travel volume in 2019 and the third busiest since AAA started tracking Thanksgiving travel in 2000, trailing only 2005 and 2019, respectively.

AAA predicts that 48.7 million people will travel by car, a modest 0.4% increase over last year but still 2.5% below 2019’s robust pre-pandemic levels of 49.9 million car travelers. Expect severe congestion with more than double the normal delays; Atlanta, Boston, Chicago, Los Angeles, New York City and Washington, D.C., are expected to be the busiest. Gas prices have more than doubled nationally over the past two years, from $2.11 per gallon in November 2020 to $5.02 this past June, although they have temporarily eased by 25% to $3.64 over the past five months.     

An estimated 4.5 million people will fly over Thanksgiving, a robust 7.9% above year-ago but still 1.4% below pre-pandemic travel volume in 2019. What to expect? Airline schedules are still reduced by about 20%, so there will be fewer options to navigate weather or mechanical delays. Airfares are more than 40% higher than a year ago, with long TSA lines and crowded terminals. Another 1.43 million travelers are leaving town by bus, rail or cruise ship, a 23.5% surge over 2021 levels, but still 3.9% below pre-pandemic travel trends in 2019.

Weather or not? Planning to shuffle off to Buffalo to visit family and friends this Thanksgiving weekend? Don’t bother, as the city was smacked with a lake-effect blizzard and a record six feet of snow last weekend. The rest of the country won’t be nearly as bad over the holiday weekend but we’re anticipating another brutally cold winter, with plenty of snow and ice in the Midwest and northeast.

Is inflation peaking? The nominal Consumer Price Index (CPI) hit a 41-year-high 9.1% year-over-year (y/y) increase in June, up from a benign 1.4% gain when President Biden took office in January 2021. But over the past four months, inflation has begun to ease, declining to a 7.7% rise in October. Core inflation (which strips out volatile food and energy prices) established a new 40-year-high 6.6% y/y increase in September, slipping to a 6.3% gain in October. 

While inflation is beginning to show tentative signs of improvement, retail inflation is still significantly above the Federal Reserve’s long-term target of 2% core inflation, which could take another two years or so of gradual declines. As a result, we expect the Fed to continue to raise interest rates through at least the end of the first quarter of 2023, although at a slower pace than its 75-basis-point rate hikes at each of their last four policy-setting meetings due to modest improvement in inflation in recent months.    

Thanksgiving dinner will be a lot more expensive Despite this recent modest improvement in the overall inflation metrics, the American Farm Bureau Federation reports in its 37th annual survey that Thanksgiving dinner will be 20% more expensive this year than last, with an increase of 37% over the past two years. It’s a recipe for the most expensive Thanksgiving dinner on record.

Turkey market in turmoil Wholesale turkey prices are up about 30% from a year ago—and more than double in some markets—as farmers are paying a lot more for feed, fuel, transportation and labor. In addition, the second-worst avian influenza outbreak on record in 39 states has led to the death of more than 49 million birds, including 7 million turkeys (about 3.6% of the nation’s turkey population), which is creating a turkey shortage at a point of peak seasonal demand.  

What about the trimmings? The price of stuffing mix has soared by 69% y/y, pie crusts and whipping cream have each risen by 26%, peas are up by 23%, dinner rolls have risen by 22%, pumpkin pie mix is up by 18% and sweet potato prices have increased by a relatively modest 11%. For whatever reason, cranberry prices have declined by 14%, so load up on the relish.

Want to pair your delicious Thanksgiving dinner with a nice pinot noir or sauvignon blanc wine? Get out the wallet. Prices for alcoholic beverages, including beer, wine and liquor, rose 5% in October from a year ago, the largest such increase in 30 years.

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Tags Markets/Economy . Inflation . Equity .

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

Consumer Price Index (CPI): A measure of inflation at the retail level.

S&P 500 Index: An unmanaged capitalization-weighted index of 500 stocks designated to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Indexes are unmanaged and investments cannot be made in an index.

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