Stock Market: Consumer Inflation Shifts Appear To Be Weakening Corporate Growth

Core Insights - The stock market highs are masking fundamental issues in consumer spending, with consumers adjusting budgets due to rising expenses [2][5] - Consumer actions are negatively impacting the "consumer defensive" sector, which is expected to provide steadier returns but has shown weak performance [3][5] Consumer Behavior - Consumers are switching to lower-priced brands, substituting products, and reducing consumption to cope with higher prices [7] - These adjustments are leading to a decline in real revenues and profits for packaged food companies, resulting in poor stock performance [5] Economic Outlook - The current economic situation may mirror trends from the early 1970s, with potential softening of the economy as consumer spending patterns change [6] - The "food away from home" industry, including restaurants, is particularly vulnerable to economic downturns [6] Inflation Impact - Despite a recent Federal Funds rate cut of 0.25%, inflation concerns persist, with core-CPI inflation at 3.1% over the past year and accumulated inflation during the Covid period at 20.2% [9][10] - The compounded inflation rate, including recent increases, stands at 24.0%, indicating ongoing challenges for businesses and consumers [10]