To The Moon

Executive Summary

When we look at averages, we have missed out on developments happening in certain sectors, demographics and income brackets. We are seeing record highs in the stock market for some stocks. Yet, we hear news of delinquency, defaults and layoffs. Are we hearing or seeing wrong? All these news can co-exist at the same time.

The heat map above shows S&P500 companies over 1 year. While most of the businesses are in green (growth), there are also companies that do not do well. Most of the utilities sector is in red with other notable ones like UPS, Tesla, and the Pharmaceutical sector. Thus, if we view the market using the indices, we may miss out on some of the struggling sectors.

Use of AVERAGE

Average helps to provide a quick overview.

average , Meaning of average , Definition of average , Pronunciation of average - YouTube

This is a good explanation of average and median.

The average is calculated by adding up all of the individual values and dividing this total by the number of observations. The median is calculated by taking the “middle” value, the value for which half of the observations are larger and half are smaller.

From statology:

The average is calculated by adding up all of the individual values and dividing this total by the number of observations. The median is calculated by taking the “middle” value, the value for which half of the observations are larger and half are smaller.

Median vs Average - Know the Difference Between Them

The above is a good explanation of Median and Average.

When we provide an average, we may have missed out on notable details.

This is a recent news extracted from the BEA website about GDP:

An average provides a quick overview of the data point. For the above, we know that the US economy has grown in the 3rd Quarter of 2023 by about 4.9%. Based on this information, we should be getting excited.

From the chart above, we can see that the S&P500 has grown 25% in 2023 (from 3rd Jan 2023 to the last day 29 Dec 2023). Over the 247 trading days, the S&P500 started the year with 3824 and closed the year with 4769. This should be good news for a start.

With the recent high in stocks and indices, it looks like the economy is doing well.

However, analysts have split views of the market heading toward a recession or achieving a soft landing as mentioned by the government.

The key macroeconomic indicators are the gross domestic product (GDP), the unemployment rate, and the rate of inflation.

Business Cycle: What It Is, How to Measure It, the 4 Phases

An extract from a recent CNBC news article:

As of October, 60% of adults said they are living paycheck to paycheck, according to a new LendingClub report. The figure is unchanged from last year. Overall, 4 in 10 consumers consider themselves worse off relative to 2022, the report found.Even as credit card debt tops $1 trillion, almost all — or 96% — of shoppers said they expect to overspend this season, according to a separate TD Bank survey.

Half of consumers plan to take on more debt to pay for holiday expenses, another report by Ally Bank found. Only 23% have a plan to pay it off within one to two months.Some 74% of Americans say they are stressed about finances, according to a separate CNBC Your Money Financial Confidence Survey conducted in August. Inflation, rising interest rates and a lack of savings contribute to those feelings.

This is extracted from a recent article by PYMNTS:

Consumers loaded up on debt even before the holidays and into Black Friday — and those of us living paycheck to paycheck may feel the pinch of that added debt.Right as delinquencies are creeping up.The latest data from the Federal Reserve, released Monday (Jan. 8) showed that overall credit was up 5.7%, annualized. And within that headline number, revolving credit, which includes credit card debt, leapt in November at an annualized pace of 17.7%. That’s the fastest pace seen, annualized, through the past several months.

This is a recent 6 Jan 2024 article from Yahoo Finance:

It’s not just low-income Americans drowning under inflation and interest rates — some higher-income folks are feeling the strain on their wallets as well.Data from a survey conducted in 2023 by personal finance software company Quicken revealed that 32% of Americans earning at least $150,000 a year are currently living paycheck to paycheck, while 36% of folks earning $50,000 to $150,000 and 55% of households earning less than that reported the same.

The following is extracted from the New York Fed.

From the New York Fed’s post:

Mortgage balances shown on consumer credit reports increased by $126 billion during the third quarter of 2023 and stood at $12.14 trillion at the end of September. Balances on home equity lines of credit (HELOC) increased by $9 billion, and now stand at $349 billion in aggregate. Credit card balances, which are now at $1.08 trillion outstanding, increased by $48 billion (4.7%). Auto loan balances increased by $13 billion, continuing the upward trajectory that has been in place since 2011, and now stand at $1.6 trillion. Other balances, which include retail cards and other consumer loans, were effectively flat, with a $2 billion increase. Student loans balances grew by $30 billion and now stand at $1.6 trillion. In total, non-housing balances grew by $93 billion.

Conclusion

When we get into the details, we will see how the different demographics cope with the current economy. Some are doing well and some could be struggling. Looking at the top line of the business (revenue) does not tell the full story about its capability and competitive advantage. Let us not be “misled” by the averages used. These are just the start of more research.

@TigerStars

$S&P 500(.SPX)$

$Cboe Volatility Index(VIX)$