by Jason Bodner

June 14, 2022

Sometimes when you’re visiting the doctor, it hurts in so many places you don’t know where to start…

What’s the biggest pain point for Americans right now? There are a lot of candidates: inflation, interest rates, pandemics, guns, foreign wars, political scandals. Which one pushes our pain levels the highest?

That might depend on when you last filled up your gas tank.

Chevron Gas Prices

With consumer confidence in the pits, NASDAQ dropped 3.5% on Friday and the S&P lost 2.9%. Why? As I write this (on Friday), the Consumer Price Index number was just released. I’ve laid out some of the details below. They are downright ugly. I highlighted and bolded any inflation figures above 5%.

Expenditure Table 1

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

It is clear to see that the real culprits ruining the party are food and energy costs – the two items subtracted from the CPI to yield the “core” rate of inflation, but most consumers buy food and gasoline every week – and not a lot of the other goods and services on the list – so let’s focus on those two.[1]

First let’s look at the energy facts: The average working American spends 27.6 minutes driving one way to work each weekday.[2] That translates to an average of 42 miles a day driven to and from work, or over 10,000 miles a year for work alone. The average U.S. car is driven 14,263 miles a year.[3] The sobering truth about this is that there are costs associated with the time commuting.

The average worker starts working at around 22 years of age. The average retirement age is 62[4]. Forty years of commuting works out to about 386 days of time in the car. (I’d suggest you get some good books on tape!)

Then there’s the hard cost… And herein lies the problem today. It should come as no surprise that gas prices have surged to 30-year highs. In May, the average price per gallon of all grades of gas was $4.55.[5]

US Grades Retail Gas Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

That’s over $70 for a 16-gallon tank. Just hearing that makes me cringe, but for the average American this cost is “highway robbery.” Let’s contextualize that in terms of real cash flow. The average American car gets fuel economy of 25.4 miles per gallon.[6]  That seems generous, based on what I get from my cars, but let’s go with it anyway. I summarized the data below: the average cost to fill up your car is $2,750 a year:

Gas Table

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Next, let’s look at food. In the U.S., the monthly cost of feeding one person is about $342.11.[7] There are an average 2.52 people per household.[8] That means it costs the average household $10,345 a year to eat.

So, we’re over 13 grand a year just to eat and drive. Of course, most activities are derivatives of eating or driving. If you want to eat at a restaurant, you must drive there. All cars eventually go to heaven, so we need to buy new ones. But there’s vicious inflation there too! Hopping on a plane costs way more than it used to due in no small part to the higher cost of energy. In fact, airfares are up 37.8% in the last year.[9]

In 2022, the average salary in the U.S. is $53,490 per year.[10] On average what’s left after taxes is 77.6% of pay [11] or $42,362, so after food and gas, over 30% of net income is gone. The average housing cost is$1,437 per month as of 2019 data.[12] Add that $17,244 a year to food and gas, and 72% of net income is spoken for before accounting for anything else, like clothes, phones, internet, entertainment, college savings, retirement savings, and on and on… Needless to say, these are just averages. There may be a second wage earner at home, but that also means a second car and all the same costs for commuting, so when food and fuels costs spike the way they are doing, it’s a real squeeze on the average American.

What’s the Fed Doing to Ease (or Worsen) This Pain?

The Fed turned hawkish at the end of last year and made numerous allusions to aggressive rate hikes. That language persists to this day. As mid-year approaches, the target Fed funds rate remains low, at 0.75% to 1.00%. With all the talk about 50 basis point hikes in the next three meetings, that may sound aggressive, but I’d like to point out that the Fed funds rate in 2019, just prior to COVID, was 2.25%.

I still believe the Fed is enacting a policy I call ghost tightening. In short, that involves using scary and aggressive language to shock markets into doing most of the heavy lifting for the Fed. That way when the economy finally cools, the Fed will not have had to raise rates as aggressively as it had once threatened.

There are two very convenient places for inflation to run rampant and squeeze the consumer into spending less elsewhere. Those two areas are food and energy. And we now see that playing out in real time.

So, as markets react daily to what the Fed might do in terms of raising rates, the smart money has been betting on what they have not yet done. Specifically, there have been huge amounts of buying in energy stocks since the beginning of the year. In fact, 24.3% of all unusual buying has been in energy.[13]

Percent Buys PIE Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

We can also see that in the chart below, on the left. The blue bars show unusual buying in energy stocks plotted against the deep blue XLE (S&P 500 Energy Sector Tracking ETF). We see that it has been relentless.

On the right we see some buying in staples, but to a lesser degree. The takeaway we can see is that staples and energy have fared way better than tech or discretionary stocks:

Energy vs XLE Staples vs XPL Charts

Tech vs XLK Discretionary vs XLY Charts

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

How long will this last? No one knows for certain, but it seems that it will last at least a little while longer.

In the meantime, the gas pump will keep demanding, “Hand over your wallet.”

[1] Bureau of Labor and Statistics

[2] US Census Bureau

[3] Bureau of Labor and Statistics

[4] US Department of Labor

[5] US Energy Information Administration

[6] EPA Automotive Trends Report


[8] Statista

[9] Bureau of Labor and Statistics

[10] U.S. Bureau of Labor Statistics


[12] US Census Bureau

[13] Fight

All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

A Look Ahead by Louis Navellier
Central Banking for Dummies

Income Mail by Bryan Perry
Income Mail is on Hiatus

Growth Mail by Gary Alexander
Has the Fed Finally Learned Some Lessons?

Global Mail by Ivan Martchev
Neither Bonds nor Inflation Are Cooperating

Sector Spotlight by Jason Bodner
“Where Does the Pain Hurt Most?”

View Full Archive
Read Past Issues Here

About The Author

Jason Bodner

Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner

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