The Thanksgiving Index: A Tasty Take on Inflation

Hey folks, it’s Terry Gordon from C.J. Lawrence. It’s Tuesday the 25th of November, just prior to Thanksgiving. This is the time of year we do our annual Thanksgiving dinner index review. We’re going to talk briefly about the bond vigilantes and whether or not they’ll ride in 2025, and then I’ll tell you where I am.

First off, we do this annually. The American Farm Bureau measures the cost of the Thanksgiving dinner each year, and we like to take a look because it gives us a little bit of a barometer of where inflation is heading. It’s a good news story this year, because the cost of your Thanksgiving dinner is down versus where it was last year, and it was down in ’23 versus 2022. But you have to remember that in 2022 there was a big spike. We’re coming off that spike now. Let’s take a look and see what some of the ingredients are that caused the improvement. 

The entire Thanksgiving meal will cost you about 5% less than it did last year. That’s good news. What’s driving that improvement is the cost of a turkey, which is down 6%. The cost of milk is down 14%. That’s good news for the proteins this year. Even sweet potatoes are down 26% versus last year, which is pretty significant. What has gone up versus last year? Stuffing is up 8.2%, and dinner rolls are up 8.4%, so the carbs are driving costs higher this year.  Cranberries too – what happened to my friends in Massachusetts, up in the bogs? The price of cranberries is up 12% this year. We’re seeing some offsetting ingredients there, but the good news, again, is that prices for your Thanksgiving dinner will be lower than they were last year. 

What are we looking at out into 2025 risk and reward? The market has been behaving pretty well. Earnings and interest rates are two things that we spend a lot of time looking at, and they appear to be in pretty good shape. Earnings growth for next year looks good. The current levels of interest rates are not punitive and are likely heading lower if you believe what the Fed is telegraphing.

As for bond vigilantes, could they ride again? The bond vigilante term was coined by our friend Ed Yardeni back in the ’90s, when he discussed how heavy issuance of treasuries could be met with resistance by the bond vigilantes and drive interest rates higher. That could then push the Treasury to issue less debt, spend less money, and keep things in check because the cost of that debt would be high.

The government is issuing a lot of debt in 2025, with a lot of new issues replacing matured issues from the last two years. About $825 billion in new issues is expected from the Treasury in just the first quarter alone. That’s about the same amount as the entire annual defense budget, which is a pretty big number. We’re going to look in 2025 to see if the bond vigilantes ride, pushing back on all this issuance from the Treasury. That would keep interest rates a little bit higher than we’ve been seeing and would probably put some pressure on markets, generally. We’re watching, and we will see if it materializes. In the meantime, the outlook for interest rates and earnings is pretty good and the stock market is behaving well.

That’s it for our pre-Thanksgiving message. Where are we and why are we here? This behind me is the Fire Island Inlet. In the direction that I’m facing, I’m facing south is Fire Island. Long Island is behind me. That’s actually Oak Island, which is an island in between Fire Island and Long Island, behind me. This is the Fire Island Inlet, which connects the Great South Bay and the Atlantic Ocean. This water right now is teeming with striped bass.

From a Thanksgiving perspective, the old lore on Long Island was that during the early Thanksgivings, and, yes, they apparently did have Thanksgiving here on the island, Thanksgiving dinner was often filled with striped bass, blackfish right from these waters and from outside the inlet, some shellfish from the beds over here, hard shell clams and oysters and some mussels. There’s a lot of migratory birds through here, so a lot of ducks populated the Thanksgiving tables back in the early days of Long Island settlement.

Just a little local color for our pre-Thanksgiving message. Hope everyone has a great Thanksgiving and we look forward to following up with you in December. Take care and happy Thanksgiving!