Political Calculations
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21 October 2024
An editorial cartoon of a Wall Street bull on the trading floor of the New York stock exchange celebrating a record high for the S&P 500. Image generated with Microsoft Copilot Designer.

It was a big week for Wall Street's bulls.

The S&P 500 (Index: SPX) achieved a new high to close out the third week of October. By the time the market closed on Friday, 18 October 2024, the index sat at a level of 5,864.67, nearly a full two percent higher than it closed the previous week, which was also a record high close for the S&P 500.

Most of that gain came on Monday, 14 October 2024 while the bond market was closed for the Columbus Day holiday. After retreating a bit during the week, stock prices rose again on Friday, 18 October 2024 to achieve the index' new record high close.

That was enough for the S&P 500's trajectory to keep tracking along in the upper portion of the redzone forecast range. The latest update of the alternative futures chart shows the index continues to largely behave as expected.

Alternative Futures - S&P 500 - 2024Q4 - Standard Model (m=+1.5 from 9 March 2023) - Snapshot on 18 Oct 2024

The market moving news of the week that was mainly revolved around two topics: central bank rate cuts and China's as yet insufficient effort to stimulate its economy.

Monday, 14 October 2024
Tuesday, 15 October 2024
Wednesday, 16 October 2024
Thursday, 17 October 2024
Friday, 18 October 2024

The CME Group's FedWatch Tool anticipates a 0.25% rate cut on 7 November 2024 with additional 0.25% cuts at 6-to-12-week intervals through 17 September 2025. The CME FedWatch tool sees the Federal Funds Rate bottoming at a target range of 3.25-3.50% at that time.

The Atlanta Fed's GDPNow tool's projection of the real GDP growth rate for the current quarter of 2024-Q3 ticked up to +3.4% from the previous week's forecast of +3.3% growth.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bull on the trading floor of the New York stock exchange celebrating a record high for the S&P 500".

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18 October 2024
Health Insurance Claims by U.S. National Institutes of Health Medical Arts and Photography Branch via Flickr

The Consumer Expenditure Survey (CEX) now covers forty years worth of data for how Americans households spend money.

That data includes how much the average "consumer unit" surveyed by the U.S. Census Bureau spends on health insurance, which like many other things in the economy, has seen significant cost inflation over the past four decades.

The following chart shows how that cost has changed from 1984, the first year for the CEX, through 2023, the latest, whose data was just released last month. As you'll see, over the past 40 years, there has been one major factor that has altered the trajectory for how much American households/consumer units pay on average for health insurance coverage.

Average Annual Expenditures for Health Insurance per Household Consumer Unit, 1984-2023

Back in 1984, the first year for the CEX, American household consumer units paid an average of $370 for health insurance. That figure grew steadily over the following years and by 2000, the average cost of health insurance for a U.S. household has risen to $980.

From 2000 through 2010, the average cost of health insurance grew faster, reaching $1,826 by 2010. Had the 2000 through 2010 growth trend continued, we estimate the average amount American households would pay for health insurance in 2023 would be $2,927.

But it didn't, thanks to the passage of the Affordable Care Act, which was signed into law in 2010. It was implemented over several years, going into full effect in 2014. The claimed goal of the law, as suggested by its name, was to make health insurance more affordable for Americans.

In 2023, the average cost of health insurance paid by American households has more than doubled what it was in 2010. At an average $4,049 per household, this expense is more than 38% higher than the trend that existed in the decade before the Affordable Care Act became law.

The chart also indicates the cost "curve" for health insurance has bent upward since 2021, which has inflated more quickly over the last few years following 2020's coronavirus pandemic.

We'll be featuring other aspects of how American consumer spending has changed over the past four decades using the latest CEX data in the weeks ahead.

References

U.S. Bureau of Labor Statistics. Consumer Expenditure Survey. Multiyear Tables. [PDF Documents: 1984-1991, 1992-1999, 2000-2005, 2006-2012, 2013-2020. Excel spreadhseets: 2021-2023]. 

Image credit: Health Insurance Claims by U.S. National Institutes of Health Medical Arts and Photography Branch via Flickr. Public domain image.

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17 October 2024

The pace at which carbon dioxide accumulates in the Earth's air continues to rise. Through September 2024, that pace is nearing the record for the modern era recorded in January 2017.

That increase has taken place as China, the world's largest source of CO₂ emissions, has seen its factory output slow as the nation's industrial output has weakened. Even so, China's carbon dioxide emissions more than double those of the United States, which means a sluggish Chinese economy still cranks out more CO₂ than any other nation by a very wide margin.

The following NASA animation illustrates that output, showing how emissions originating from various locations around the world diffuse through the Earth's atmosphere. Check out the CO₂ 'smoke cloud' erupting from eastern China....

With Chinese factories slowing, the continued increase in the accumulation rate of CO₂ during the last few months may be a consequence of the strong El Niño event, which ran from May 2023 through April 2024. While not as strong as the 2015-16 El Niño event that was accompanied by extensive wildfires in Indonesia, it appears to be having a similar lingering impact, as seen in the following chart tracking the rate at which the trailing year average of the year-over-year change in the concentration of carbon dioxide in the Earth's atmosphere is changing.

Trailing Twelve Month Average Year-Over-Year Change 
in Parts per Million of Atmospheric Carbon Dioxide, January 2000 - September 2024

New published research by Leipzig University researchers points to the role of strong El Niño events behind that observation. Here's a summary of their findings from the university's press office:

A recent study challenges previous assumptions about the connection between CO₂ in the atmosphere and temperatures in the tropics. Between 1959 and 2011, the CO₂ content in the atmosphere responded twice as strongly to temperatures in the tropics than before. This has often been attributed to increasing droughts in the tropics and to changes in carbon cycle responses caused by climate change. However, the current study conducted by researchers from the Max Planck Institute for Biogeochemistry and Leipzig University suggests that a small number of particularly strong El Niño events could be responsible for this.

Both tropical and non-tropical ecosystems absorb large amounts of carbon that were previously released into the atmosphere through human CO₂ emissions. Globally, land surface ecosystems act as a carbon sink and absorb on average around a third of human CO₂ emissions. These ecosystems are therefore a natural buffer for climate change. In the 1980s and 1990s, however, researchers observed an increased fluctuation in global carbon storage on land, and it appeared that the CO₂ growth rate was particularly sensitive to temperatures in the tropics. In a recent study, researchers from Jena and Leipzig found that this “doubling” of sensitivity was caused by the increased occurrence of El Niño events in the 1980s and 1990s compared to 1960–1979. This also includes the extreme El Niño events of 1982/83 and 1997/98. El Niño events cause severe droughts and heat waves in the tropics, which affect plant growth and thus reduce carbon uptake. In times of El Niño, vegetation even releases large amounts of carbon that would otherwise be sequestered in the soil or forests. This causes the CO₂ content in the atmosphere to increase.

The authors of the study emphasise that this CO₂ increase is due to internal climate variability rather than a systematic change in the carbon cycle caused by climate change. “Our results show that this doubling of sensitivity is not necessarily a sign of a fundamental change in the response of the carbon cycle to climate change,” says Na Li from the Max Planck Institute for Biogeochemistry, first author of the study. Instead, it is caused by the combination of extreme El Niño events and their global impact.

Tropical droughts associated with strong El Niño events contribute to a faster pace of CO₂ accumulation in the atmosphere by reducing its absorption by plant life until the affected regions have had sufficient time to recover, which can be aggravated by related wildfire events. Our chart showing the strong El Niño events of 2015-16 and 2023-24 suggests that effect continues for many months after the El Niño events themselves have ended. Through this point of 2024, that effect would seem to be more than offseting the slowing output from China's economy.

The big question for the months ahead is whether the Chinese government's new efforts to stimulute China's economy will offset the natural recovery from the 2023-24 El Niño event and cause the rate of CO₂ accumulation to continue increasing rather than diminishing.

References

National Oceanographic and Atmospheric Administration. Earth System Research Laboratory. Mauna Loa Observatory CO2 Data. [Online Data]. Updated 5 October 2024. Accessed 11 October 2024.

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16 October 2024
A large cargo ship docked in a harbor photo by Matt Benson on Unsplash - https://unsplash.com/photos/a-large-cargo-ship-docked-in-a-harbor-v5Dpn-vMF58

After July 2024's tariff-clock beating surge, the total value of trade recorded between the U.S. and China coasted slightly higher in August 2024, even as its momentum reversed.

With the Biden-Harris administration's new and expanded set of tariffs taking effect during the month, the negative change in momentum was expected. Importers of goods from China had rushed to pull as many deliveries of goods subject to the new tariffs ahead as possible, which by itself will diminish the level of trade in the months ahead. Although these imports typically peak in October each year, the actions to avoid the Biden-Harris administration's tariffs likely moved 2024's peak to July. U.S. imports of goods from China fell in August.

The total value of trade was up in August 2024 however because U.S. exports of agricultural goods like soybeans to China rose. U.S. exports of these goods to China are typically elevated during the last quarter of the year, but were elevated year-over-year.

The following chart shows how the August 2024 surge impacted the total value of goods traded between the U.S. and China.

Combined Value of U.S. Exports to China and U.S. Imports from China, January 2017 - August 2024

This chart shows the nominal level of the total value of goods exchanged between the U.S. and China over the period from January 2017 through August 2024. Unfortunately, it doesn't fully convey the effects of the tariffs and other events on the level of U.S. and China trade.

For that, we need to take the effects of inflation into account. In the next chart, we've done that for the combined value of goods imported and exported between the U.S. and China, which are expressed in terms of constant 2017 U.S. dollars.

Inflation-Adjusted Total Value of Goods Exchanged Between the U.S. and China, January 2017 - August 2024

The level of trade between the U.S. and China peaked at $54.2 billion in 2017 USD in September 2018, when the Trump administration initiated a tariff war with China (Event A). The level of trade dropped 18.4% to $44.8 billion in 2017 USD, which would have marked a bottom given December 2017 Phase 1 trade deal between the U.S. and China, but didn't because of the onset of the coronavirus pandemic (Event B). The pandemic took the inflation-adjusted bottom of trade between the U.S. and China down to its Trump-era low of $42.8 billion in April 2020, some 21.1% below its September 2018 peak (Event C).

After April 2020, the level of trade grew rapidly, until the Biden-Harris administration initiated a period of high inflation for the U.S. economy with the passage of the American Rescue Plan Act of 2021 in March 2021 (Event D). The high inflation unleased in this period stalled the recovery in trade between the two nations, which ranged between $50 and $51 billion through September 2022.

That coincides with the peak in trade ahead of the Biden-Harris administration's announcement of its own tariffs and export restrictions on U.S. semiconductor technologies, which crashed the amount of trade between the U.S. and China. The level of trade plunged $9.8 from $50.9 billion in September 2022 to bottom at $41.1 billion in May 2024.

At this point, the Biden-Harris administration's trade sanctions against China have been more damaging in inflation-adjusted terms than the Trump administration's non-pandemic affected sanctions. However, in May 2024, the Biden-Harris administration announced new and expanded tariffs and other trade sanctions in May 2024 (Event E), which started taking effect in August 2024 and is already negatively affecting the trade data. That impact will continue in the months ahead.

References

U.S. Census Bureau. U.S. International Trade in Goods and Services (FT900). U.S. Trade in Goods with China, Not Seasonally Adjusted, Nominal Figures, Total Census Basis. [Online database]. Accessed 12 October 2024.

U.S. Census Bureau. U.S. International Trade in Goods and Services (FT900). U.S. Trade in Goods with World, Seasonally Adjusted, Nominal Figures, Total Census Basis. [Excel spreadsheet]. Accessed 12 October 2024.

U.S. Census Bureau. U.S. International Trade in Goods and Services (FT900). Real U.S. Trade in Goods with World, Seasonally Adjusted, Chained 2017 U.S. Dollars, Total Census Basis. [Excel spreadsheet]. Accessed 12 October 2024.

Image Credit: A large cargo ship docked in a harbor photo by Matt Benson on Unsplash.

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15 October 2024
A can of tomato soup on a yellow background photo by Anastasiya Badun on Unsplash - https://unsplash.com/photos/a-can-of-tomato-soup-on-a-yellow-background-B3NigPgxydQ

The price of an iconic can of Campbell's Condensed Tomato Soup remained largely stable during the past three months. The trailing twelve month average unit price for the 10.75 fluid ounce can held steady at $1.28. That's the same average price per can as we recorded in July 2024.

Unfortunately, outside of a brief example at Meijer's in September 2024 when the price was marked down to a dollar per can, we're finding few notable sales of Campbell's tomato soup as soup season in the United States gets under way. Prices are substantially higher than they were four years earlier and are nearly double what they were in 2010.

For this edition of our ongoing series on Campbell's Tomato Soup prices, we find that Meijer's sale has ended with the price returning to its regular $1.35 per can level. Here's the rundown of prices and how they've changed since July 2024 from our survey of ten major grocery-selling retailers across the U.S.

  • Walmart: $1.26/each, unchanged
  • Amazon: $1.99/each, increase of $0.70 (+54.3%)
  • Kroger: $1.39/each, unchanged
  • Walgreens: $1.99/each, unchanged
  • Target: $1.39/each, unchanged
  • CVS: $2.49/each, unchanged
  • Albertsons: $1.49/each, decrease of $0.20 (-11.8%)
  • Food Lion: $1.25/each, unchanged
  • H-E-B: $1.31/each, unchanged
  • Meijer: $1.35/each, unchanged

The following chart shows how the price of a can of Campbell's Tomato Soup has evolved during the 2000s:

Campbell's Condensed Tomato Soup Unit Price per Can, January 2000 - October 2024

Perhaps the biggest news from the Campbell Soup Company (NYSE: CPB) since our last update is the revelation of its plan to remove "Soup" from the company's name! Here's the story from 11 September 2024:

Campbell Soup Co. announced its intention to change its name at an annual meeting of investors on Tuesday. The 155-year-old food seller, which is most famous for its namesake canned soups, says it would now like to be known as Campbell’s Co.

CEO Mark Clouse said in a statement that this “subtle yet important change” will retain the company’s iconic name “while better reflecting the full breadth” of its portfolio today.

Campbell hasn’t been exclusive to the soup business for some time. The company also owns brands like Prego sauce and Goldfish crackers — and completed a $2.7 billion acquisition of Sovos Brands, the maker of Rao’s pasta sauces, just earlier this year.

Campbell’s roots date back to 1869, as a modest operation out of New Jersey that later grew. The current Campbell Soup name was adopted in 1922, according to the company’s website.

Since the news article omits it, here's the link to the company's website, which identifies the name "Campbell Soup Company" being used in November 1922. Here's a public domain image of 1920's era advertising for Campbell's Tomato Soup that shows it being used on the can:

Circa 1920s-era advertisement for Campbell's Condensed Tomato Soup

That's quite different from the company name that appeared on the label applied to the first cans of Campbell's Condensed Tomato Soup when it was introduced in 1897. We should also note the label on the Joseph Campbell Preserve Co.'s cans of soup was itself very different, featuring colors more at home with the arrival of soup season than the much more familiar red and white design the company rolled out in 1898.

First Campbell's Condensed Tomato Soup Label from 1897

Image credits: A can of tomato soup on a yellow background photo by Anastasiya Badun on Unsplash. The public domain image of the vintage 1920's era advertisement for Campbell's Tomato Soup was posted online by Halloween HJB on Flickr. The original 1897 label for Campbell's original condensed tomato soup cans is likewise in the public domain and was featured at Modern Farmer in an article about the company's role in developing its own unique tomatoes.

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