When it was first officially established on 3 March 1957, the S&P 500 (Index: SPX) had a total market capitalization of $172 billion. Over twenty five years later, at the end of 1982, the market capitalization of the entire S&P 500 had grown to more than $1 trillion.

Now, nearly 36 years later, at least two of the 505 companies that currently compose the index have market caps that have reached values of $1 trillion or more: Apple Computer (Nasdaq: AAPL) and Amazon (Nasdaq: AMZN), neither of which existed in 1957 and only one of which existed in 1982.

Overall, the market capitalization of the entire S&P 500 stands at roughly $25.8 trillion through the end of August 2018. The following chart tracks the history of the index' market valuation since it reached $1 trillion in value. We also have a chart showing the vertical axis on a logarithmic scale if you would prefer to see that version!

A third company, most popularly known as Google but officially called Alphabet (Nasdaq: Amazon (Nasdaq: GOOG and GOOGL), which also did not exist in either 1957 or in 1982, could also reach that lofty market valuation during 2018.

We're going to have some fun exploring some of the trends in the average American household spending data contained within the 2017 Consumer Expenditure Survey (CEX), where we'll start with what Americans are paying to either own a home or to rent a residence in the United States.

The chart below shows all the historic data recorded for the amount that all American household "consumer units" have paid on average if they're buying a home, where they pay principal and interest on a mortgage, or if they are renting their dwelling from 1984 through 2017.

In this chart, you can see where the cost to buy a home in the U.S. rose rapidly before peaking in 2007, after which, the cost to own crashed until 2016, where it has recently started rising. Meanwhile, we can see that the cost to rent a dwelling has steadily increased without serious interruption from 1984 through 2017, where the rate at which American household expenditures for rent have grown at a faster pace since 2005 than they did in the 20 previous years.

It's important to note here that the data reported by the Consumer Expenditure Survey is spreading all these payments out over all household consumer units in the United States. In 2017, those 130,001,000 households include 48,231,000 that pay rent and 47,129,000 that have mortgages. The remaining 34,641,000 households own homes with no mortgages, and thus have $0 expenditures for either mortgage principal and interest payments or for rent.

We can do some back-of-the-envelope math to work out what the average rent payment or mortgage principal plus interest payment is for the Americans who have these payments. In the case of rent, we can start with 2017's $4,167 average annual expenditures on rented dwellings and multiply it by 130,001,000 households to get the aggregate amount of rent paid in the U.S. according to the 2017 CEX survey of $541,714,167,000. Dividing that amount by 48,231,000 renters gives us an annual average rent of $11,232. To get to the average monthly rental payment for the renters surveyed by the BLS and Census Bureau, we divide by 12 to find out that it is $935 per month.

That figure is lower than the "record-high average of $1,405 per month" rent figure that RentCafe estimated using data from Yardi Matrix covering apartments in cities with over 100,000 residents. The CEX data also covers smaller population centers, so it's reasonable that its reported rent figure would be less than that figure, but we should note that it is also likely a record high.

Looking at mortgage holders, the average principal paid in 2017 was $1,839 and the average mortgage interest and other charges paid was $3,265), which combined for an average mortgage payment of $5,104 for all 130,001,000 American household consumer units. Doing similar math to what we did for rent, we came up with an average monthly mortgage principal plus interest payment of $1,173 for Americans buying their homes, which is about 25% higher than the average monthly payment of American renters. Or if you prefer, in 2017, the average rent in the U.S. costs 80% of what the average payment to a mortgage lender is.

In doing this analysis, we're omitting other costs that are often included in mortgage payments, such as property taxes and homeowner's insurance. We may come back and revisit the topic at some point in the future, but since you've now seen how to do the math, if you want factor those expenditures into it, you're more than welcome to beat us to the punch!

As we close, we'll leave you with the immortal wisdom of Jimmy McMillan, who back in 2010, represented New York's The Rent Is Too Damn High Party in that state's election for governor.

In 2018, he would be a much better governor for New York than any of the current candidates!

References

Szekely, Balazs. National Apartment Rents Hit New Milestone, Demand for Small Apartments Catches Up with Family-Sized Rentals. RentCafe Blog. [Online Article]. 4 July 2018.

Lane, Rachel. U.S. housing rents hit record-high average of $1,405 per month. MoneyWatch. [Online Article]. 6 July 2018.

U.S. Bureau of Labor Statistics and U.S. Census Bureau.  Consumer Expenditure Survey.  Multiyear Tables.  [PDF Documents: 1984-1991, 1992-1999, 2000-2005, 2006-2012, 2013-2017]. Reference Directory: https://www.bls.gov/cex/csxmulti.htm. Accessed 11 September 2018. 

U.S. Bureau of Labor Statistics and U.S. Census Bureau.  Consumer Expenditure Survey.  Table 1702. Housing tenure and type of area. [PDF Document]. Accessed 11 September 2018. 

The S&P 500 closed out the third week of September 2018 on an upnote, but not by so much that it resumed setting the kind of new record highs that it was just a few weeks ago.

The following chart shows the latest update to our spaghetti forecast chart for the trajectory of the S&P 500, where we find that investors would appear to be currently splitting their forward-looking attention between the future quarters of 2018-Q4 and 2019-Q1, with a somewhat heavier focus on 2019-Q1.

As for why investors would appear to be looking at these two future quarters in particular, we suspect that it has a lot to do with the Federal Reserve's plans for changing its Federal Funds Rate (FFR), the interest rate that banks pay for borrowing money from the Fed, which sets the floor for short term interest rates in the United States. When we last reported upon investor expectations for the future for the FFR just over a month ago, investors were anticipating that the Fed would hike that rate by a quarter point twice more in 2018, in both September and December, then take a breather until June 2019 before doing it again.

Since then, the combination of reports of continued strength in the U.S. economy with multiple statements by the Fed's minions in recent weeks is giving investors reason to anticipate that there will be no breather in the Fed's latest series of short term interest rate hikes. The following table indicates what the CME Group's FedWatch tool anticipates for the future of the Federal Funds Rate based on information from the FFR futures market. (Please click here to view a screen shot of the table if you're reading this article on a site that republishes our RSS news feed, but which doesn't properly render the table.)

The table confirms that investors are now anticipating quarter point rate hikes in September 2018 and December 2018. In addition, as of the last week, investors are now also given just over a 50% probability that the Fed will again hike interest rates by another quarter point or more in March 2019 (as can be determined by adding the probabilities in the table cells highlighted in yellow for the Fed's March 2019 meeting).

That assessment isn't just based on this data. It's also based in part from the news reports we reviewed during the third week of September 2018, where the following stories appeared noteworthy in describing the noise in the market.

Monday, 10 September 2018

• Oil steadies as U.S. inventory concerns curb gains
• S&P, Nasdaq edge higher after recent losses but Apple drags
  • Earlier headline: US STOCKS-S&P, Nasdaq edge higher on tax optimism despite Apple drag

Tuesday, 11 September 2018

• Oil rises as U.S. sanctions on Iran squeeze supply
• Wall Street gains as Apple, tech rebound; oil lifts energy shares

Wednesday, 12 September 2018

• Brent reaches $80 a barrel after fall in U.S. crude stocks
• Trump 'definitely' boosted U.S. growth, Fed's Bullard says
• Fed has room to raise interest rates for some time, Brainard says
• Fed says it whipped U.S. unemployment, maybe too well
• Dow, S&P 500 end up slightly after trade talk news; Apple slips
• China welcomes U.S. invitation for trade talks

Thursday, 13 September 2018

• Oil has steepest drop in a month as economic concerns threaten demand
• House panel backs bill to make Trump tax cuts permanent
• Impact of U.S. tax reform may last longer than expected: Fed's Bostic
• Atlanta Fed's Bostic: Rate hikes can continue for several more quarters
• Fed's Bostic says taking 'wait and see' attitude toward fourth 2018 rate hike
• Wall Street rises with Apple, easing trade concerns

Friday, 14 September 2018

• Oil mixed as China tariff talk scotches early rally
• Trump readies tariffs on $200 billion more Chinese goods despite talks: source
• Fed policy to turn mildly restrictive in 2019, Evans says
• Fed's Evans says premature to read much into yield curve
• Fed's Evans sees one or two more rate hikes this year
• Yellen: Fed should commit to future 'booms' to make up for major busts
• Wall Street flat as looming tariffs offset gains in financials

For additional aspects of the week's economics and markets-related news, be sure to check out Barry Ritholtz' list of the positives and negatives he found in the week's data.

How much of a health benefit can you get for the public by imposing taxes on products like sugary soft drinks?

Advocates for soda taxes frequently cite positive health benefits as the reason for why governments should impose this kind of sin tax on the distribution and sale of sugary beverages to consumers within their jurisdictions. In doing so, many claim that such a tax would fix what in economics is called a "negative externality", which in this case, represents higher costs to public health systems for treating conditions such as obesity and diabetes, where sweetened beverages are targeted by soda tax advocates for their contributions to the problems they proclaim because of their popularity and their sugary calorie content.

But for such an argument to be valid, the imposed tax would have to realistically achieve its desired aims without any unintended consequences that create new costs or other problems that offset any of the realized benefits. Since soda taxes have only been applied in a limited number of jurisdictions in recent years, the data available to assess their impact is relatively limited, so many of these advocates' claims of achievable health benefits have not been able to be challenged.

We do however have evidence from what happened in Philadelphia during the first year of that city's experience with its controversial 1.5-cent-per-ounce soda tax, which it calls the "Philadelphia Beverage Tax". Using monthly tax collection data compiled by the Philadelphia Department of Revenue, and the city's expectation for what would be its annual revenue from the tax and its predicted reduction in sweetened beverage sales, we are able to identify the amount of soda that was distributed for sale in Philadelphia in 2017 and also how much city officials believe would have been distributed in the absence of its soda tax. The following chart shows those results.

In the next chart, we've simply tallied up the monthly data for the number of ounces of sweetened beverages subject to the Philadelphia Beverage Tax to get the picture for the quantity of beverages that would have been distributed for sale in the city without the tax and also the amount of what was actually distributed in the city after the tax was imposed on 1 January 2017.

In this second chart, we see that the Philadelphia Beverage Tax reduced the amount of diet and regular sweetened beverages in the city by the equivalent of 3.182 billion ounces in 2017, which is quite a lot, but should be expected to happen whenever a tax imposed by a government causes the price of a product that consumers buy to increase substantially. From here, we'll need to do some math to estimate how much that works out to be in potential calorie reduction.

So we built a tool to do that math! The following tool will estimate the reduction in consumed calories from the implementation of the Philadelphia Beverage Tax on a per capita basis, where we've added a factor to account for the share of non-diet "regular" beverages that are consumed each year, since these are where the vast bulk of the sugary calories are to be found. If you're reading this article on a site that republishes our RSS news feed, please click here to access a working version of this tool. If you would rather not click through, you can view a screenshot of the tool's results with the default data.

Using the default data in our tool, we find that the reduction in the amount of sweetened beverages distributed in Philadelphia would have been sufficient to reduce the weight of every man, woman and child in the city by five pounds, assuming that none of these people increased their consumption of other calorie containing beverages and foods, and also assuming that they didn't leave the city to buy sweetened beverages that were not subjected to the city's controversial soda tax, or acquired them from bootleggers who smuggled them in.

We've already run the numbers for the increased calories of alcohol-based beverages sold within the city, whose sales surged during 2017, which totaled the equivalent of an additional 114 12-ounce containers of beer consumed by each Philadelphian over the year. Assuming 149 calories per container per person, the average Philadelphian consumed an additional 16,986 calories during 2017. With 3,500 calories corresponding to the gain or loss of a pound of body weight, that increased alcohol consumption would, when spread over every man, woman and child in the city, put an average of 4.9 pounds back onto the bodies of every Philadelphian! [In reality, a larger amount of weight would be gained by the legal drinking age portion of the city's population, but you get the idea....]

When you consider that we haven't yet accounted for sweetened beverage consumers shifting their shopping to outside the city to avoid the Philadelphia Beverage Tax, or the smuggling of untaxed soda into the city for sale by bootleggers, it's pretty clear that Philadelphia's soda tax failed as meaningful health improvement measure for the city's population, where the average calorie consumption per capita almost certainly was either flat or rising during 2017.

One detailed marketing study found that sales of sweetened beverages increased by anywhere from 5% to 38% depending on beverage type in Philadelphia's suburbs during the first five months the tax was in effect, but we don't know the net extent to which this increased sales volume of sweetened beverages not subject to Philadelphia's soda tax offset reduced sales in the city for the full year. In our tool, we set the default value of the tax avoidance factor to 0%, but we believe a conservative estimate would fall between 10% and 20% - you're more than welcome to substitute these percentages or your own estimate into our tool to take this particular factor more realistically into account.

Other factors that we're not considering is the extent to which reduced soft drink consumption may have offset by purchases of bottled water and untaxed packets of sweetened drink powders, where consumers could blend their own calorie-rich sugary beverage. Likewise, we're also not considering whether consumers in the city, instead of buying taxed soda pop, instead opted to increase their consumption of any of the many inexpensive, calorie-laden treats that are exempt from Philadelphia's soda tax to satisfy their sweet tooth.

Since reduced calorie consumption would have provided the primary health benefit of having imposed such a tax, the absence of any significant reduction would mean that no positive benefits through reduced medical costs for the treatment of excessive calorie consumption-related health conditions were realized on average among Philadelphia's population as a result of the city's soda tax. But then, since the Philadelphia Beverage Tax was never intended to improve the health of Philadelphians, this outcome should not be a surprise.

The U.S. Census Bureau has published its annual report on Income and Poverty in the United States, which we've used to visualize the cumulative distribution of income for U.S. individuals, families and households in the following animated chart. The cumulative income data applies for the 2017 calendar year - if you're looking for income data for the 2018 calendar year, it will not be collected until March 2019 and will not published until September 2019.

We set up the animation to present each of the frames for 7.5 seconds each, but if you'd prefer more time to inspect them, here are links to the static cumulative income distribution charts for U.S. individuals, families, and households.

If you would like to estimate where you fall on the the income distribution spectrum in the U.S. using these charts, all you need to do is find your income on the horizontal axis, trace a vertical line up to where it intercepts the curve on the graph, then trace a horizontal line to the left side of the chart where you can roughly approximate your income percentile ranking on the vertical scale.

But if you would like a more precise estimate, we have updated our "What Is Your Income Percentile Ranking?" tool with the 2017 income distribution data. Our tool can also estimate what your income percentile would have been in any calendar year from 2010 through 2016.

Finally, if you would like more current estimates of median household income, we've been happy to accommodate your information needs since August 2017!

We produced the chart above, covering through July 2018, just a few weeks before the Census Bureau published its annual report for 2017. If you've been following our series, you were not in any way surprised by what the U.S. Census Bureau reported for that year!