Most companies assume marketing drives sales.

Spend more, sell more. Pull back, and sales slip.

It’s an intuitive story, but it may not be entirely accurate. But there’s a simple way to test how much of a company’s performance comes from its own marketing and how much comes from the economy around it.

If marketing were doing most of the work, revenue would follow the marketing budget. It would rise when spending rose and fall when spending fell, more or less regardless of what the broader economy was doing.

If the business cycle were doing most of the work, revenue would follow the economy instead. And marketing spending would tend to move at the same time as revenue, or after it, not before.

So we tested it on a real company.

The test case: Bloomin’ Brands

Bloomin’ Brands owns Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, and Fleming’s. Casual dining is about as discretionary as consumer spending gets. When households feel good, they go out for a steak. When they don’t, they cook at home or find cheaper alternative restaurants.

Bloomin’ also reports its advertising expense every year, which lets us line up marketing against results over more than a decade.

We compared three series: Bloomin’ revenue, Bloomin’ advertising expense, and U.S. retail trade sales as a broad read on the consumer. All three are measured the same way, as an annual year-over-year rate of change: the most recent 12 months compared with the 12 months before that. That smooths out seasonality and one-off quarters and makes the turns in each series easy to see.

Revenue moves with the consumer

Start with revenue and retail trade.

The level of growth isn’t the same. From 2015 through 2019, Bloomin’ grew more slowly than retail overall, which may reflect company decisions, consumer perception of the brand, or even the pressures facing casual dining as a whole.

But look at the timing of the turns. The two series peaked within a few months of each other in late 2014 and early 2015. Both bottomed in the first half of 2016. Both peaked again in the late summer of 2018. Both peaked in the same month, February 2022. And both bottomed in 2024.

That’s what a cyclical business looks like. The economy sets the direction, and the company rides it.

Marketing follows revenue

Now compare revenue with advertising.

If marketing were the engine, the orange line would turn first and the blue line would follow. In the most recent cycles, it’s the other way around.

2021 is the clearest example. Bloomin’ cut advertising 54% in 2020, then cut it another 11% in 2021, the lowest level in our data. Revenue rose 30% anyway. That recovery wasn’t bought with marketing. It came from consumers opening their wallets as the economy reopened, the same surge you see in retail trade.

2022 is the mirror image. Revenue growth peaked in February 2022, the same month retail trade growth peaked. Advertising growth didn’t peak until late 2022. Marketing spending rose 57% in 2022 and another 23% in 2023, while revenue growth kept slowing right along with the consumer. The budget accelerated after the cycle had already turned.

The recovery since 2024 tells the same story. Revenue growth bottomed in late 2024 and has improved since, alongside retail trade, even though Bloomin’ cut advertising in both 2024 and 2025.

Here’s the full scorecard of turning points:

To be fair about it, the record isn’t perfect. In 2013 and 2014, advertising growth crested roughly a year before revenue growth did, and 2015 to 2017 is mixed. We’re not claiming marketing does nothing. We’re saying it isn’t what always sets the direction. Revenue turns with the consumer. Marketing turns with revenue, or after it.

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Budgets that follow revenue arrive late

Here’s the practical problem.

When marketing budgets follow results, they become pro-cyclical. Companies spend most freely after a strong year, which is often right when the cycle is peaking. They cut hardest after a weak year, which is often when demand is about to come back on its own.

That’s close to what the Bloomin’ data shows. The biggest increase in advertising came after revenue growth had peaked, and the cuts continued into a recovery that was already underway.

This isn’t a knock on Bloomin’. It’s one of the most common ways companies budget: look at last year, adjust, repeat. But it means the money tends to land at the wrong point in the cycle.

Flip the timing

If the macroeconomy is carrying your business, marketing’s real job changes. It isn’t there to create the cycle. It’s there to change how you come out of each phase of it.

Early in an upswing, rising demand lifts most boats. Spending heavily there often pays for customers who were coming back anyway. That’s the time to have pricing, staffing, and capacity ready, and to hold on to the war chest.

As the cycle approaches its peak and moves into deceleration, the math changes. That’s when marketing dollars can do the most work. Time the spending so it reaches customers near the peak, and one of two things happens. Either you stretch the peak into higher highs, or you soften the drop by bringing in new customers while competitors are pulling back.

Either way, you’re working with the cycle instead of reacting to it.

The catch is that campaigns take time to plan, launch, and ultimately allow the end customer to change behavior. The decision to deploy has to be made before the peak, while the business still feels great. That’s the hardest conversation to have in a management meeting:

“Maybe we should step up marketing because the economy is going to slow.”

“Why? We’re having a great year.”

That’s exactly the point. A great year is when you have the cash, the customers, and the breathing room to act. Once the contraction arrives, everyone is fighting for the same shrinking pool of customers at the same time.

Why 2027 matters

We expect the broader economy to move into a cyclical decline, or deceleration phase, during 2027.

That doesn’t mean the economy falls off a cliff. Deceleration and contraction are not the same thing. Deceleration means growth is slowing, and many companies keep growing through it, just not as quickly.

But right now, retail trade growth has been climbing since late 2024 and reached 4.5% in July 2026. Bloomin’ revenue growth has turned positive again. For a lot of consumer-facing businesses, things feel good.

That’s the setup. If your business moves with broader consumer trends, the window to plan the timing of your next marketing push isn’t after sales start slipping. It’s now.

The cycle doesn’t tell you exactly what to do. It tells you when to do it.

You don’t wait until you’re coughing to buy the cold medicine. And you don’t wait until sales are falling to decide when to spend.

About the data

Revenue is Bloomin’ Brands quarterly revenue, 2011 through the second quarter of 2026, from company filings. Advertising is Bloomin’ Brands annual advertising expense, 2009 through 2025, from company filings; annual totals were allocated to quarters and months using revenue seasonality, so the timing of the advertising series is approximate and its turning points are only precise to within about a year. Retail is U.S. retail trade sales. All series are shown as the annual year-over-year change, the 12-month average versus the prior 12-month average. This analysis uses public data, is not affiliated with Bloomin’ Brands, and is not investment advice.

On August 18, the United States crossed a milestone that was almost designed for headlines:

$40 trillion in federal debt.

Forty trillion dollars looks objectively ridiculous:

$40,000,000,000,000.

We slipped an extra zero in there, and we bet you didn’t notice.

You just went back and counted, didn’t you.

We didn’t slip anything. That is exactly the right number of zeros. But you had to check, and that is the trouble with a number this size. Nobody can actually feel it.

How quickly that number is growing isn’t especially comforting either.

In July, the federal government spent $432 billion more than it collected, the largest July deficit on record. Some of that was a calendar quirk, because August 1 fell on a weekend and payments were pulled into July. Adjust for those shifts and the deficit was still roughly $333 billion. The fiscal year deficit had already reached $1.799 trillion with two months remaining.

Our preliminary read of Treasury’s Daily Treasury Statement puts August near a $201 billion cash-flow shortfall. The official Monthly Treasury Statement can differ from the daily cash accounting, so consider that a near-real-time estimate rather than the final score.

Those are big numbers.

But here is the slightly strange part:

The $40 trillion itself is not really what worries us.

$40 Trillion Is Not the Problem

Governments are not households.

That does not mean government debt does not matter. It means looking at the dollar amount alone tells us surprisingly little.

The economy grows. Incomes grow. Prices rise. Tax revenues generally grow with them.

A country can carry substantially more debt in 2026 than it could in 1996 for the same reason a household earning $250,000 can generally carry a larger mortgage than one earning $50,000.

What matters is the relationship between the debt and the income available to support it.

For a country, one of the most useful comparisons is debt relative to GDP.

And that is where the picture gets more interesting.

CBO estimates federal debt held by the public at roughly 101 percent of GDP in 2026.

By 2036, it projects that figure reaching 120 percent.

For context, the previous American record was approximately 106 percent, reached in 1946, just after World War II.

Only in the immediate aftermath of World War II has the United States carried a comparable debt burden.

WE HAVE BEEN HERE BEFORE. WE ARE HEADED SOMEWHERE WE HAVEN’T

The $40 trillion headline gets your attention.

That chart is what should keep it.

But even debt relative to GDP is only half of the story.

The other half is what we are paying to carry it.

The Interest Bill Is Where Things Get Uncomfortable

In 1946, debt held by the public was 106 percent of GDP.

Today we are approaching the same neighborhood.

But the cost of carrying that debt is becoming considerably more burdensome.

Our historical work shows that net federal interest consumed about 10.5 percent of federal receipts in 1946.

In 2025, it consumed 18.5 percent, the highest reading in our series going back to 1940.

Similar debt burden. Much heavier carrying cost.

THE DEBT IS GETTING MORE EXPENSIVE

Two panels. Panel A, debt held by the public as a percent of GDP: 1946 at 106.3, 2025 at 98.1. Panel B, net interest as a percent of federal receipts: 1946 at 10.5, 2025 at 18.5. The takeaway: similar debt burden, very different carrying cost.

And it keeps growing.

CBO projects net interest expense rising from about $1 trillion in 2026 to more than $2.1 trillion in 2036. As a share of GDP, it rises from 3.3 percent to 4.6 percent and remains above 3.2 percent in every projection year, territory CBO says would be the highest sustained level since at least 1940.

At $10 trillion of debt, interest rates are mostly a monetary-policy story.

At $40 trillion, they start becoming a fiscal story too.

And that creates a feedback loop.

Larger deficits require more borrowing.

More borrowing increases the supply of government debt competing for capital, which can put upward pressure on interest rates.

Higher rates increase government interest costs.

Those interest costs create larger deficits.

Wash. Rinse. Borrow. Repeat.

Persistent deficits can also add demand to the economy, adding to inflation pressure when the economy is already running hot.

None of this means a fiscal crisis is imminent.

It does mean the math is getting harder.

So how do we make the math easier?

The Obvious Doors Are Not Popular Doors

There are three familiar ways to improve the math: collect more, spend less, or grow faster.

Easy. We have solved the federal debt problem.

Someone should probably tell Congress.

The difficulty is that the first two solutions involve asking voters either to send Washington more money or to receive less from Washington.

Neither has historically been a fantastic campaign slogan.

Growth is obviously preferable, but policymakers cannot simply turn a knob and order another percentage point of productivity growth.

Which leaves us wondering whether, as the debt burden becomes more difficult to manage directly, policymakers eventually become interested in some less obvious options.

Fortunately, or unfortunately depending on which side of the balance sheet you are standing on, we have seen this movie before.

The Last Time We Were Here

The last time the United States carried this much debt relative to its economy was after World War II.

America brought that burden down through a mix of strong economic growth, fiscal adjustment, inflation, and a broader financial architecture that economists later came to call financial repression.

The denominator matters here. Debt-to-GDP is a ratio, so the government does not necessarily have to pay down the debt dollar for dollar to reduce the burden. If nominal GDP grows faster than the debt itself, the ratio falls.

And nominal GDP grows in two ways: the economy can produce more in real terms, and the prices attached to that output can rise. Postwar America benefited from both. Strong real growth expanded the economy underneath the debt, while inflation increased nominal incomes, prices, and tax revenues relative to debt that had been issued earlier in fixed dollars. In effect, the economy grew around the debt.

But policymakers also influenced the other side of the equation: what the government had to pay to finance that debt.

During World War II, the Federal Reserve held short-term Treasury bill rates near three-eighths of one percent and defended a roughly 2.5 percent ceiling on long-term government bonds. The broader postwar system also included regulations such as Regulation Q, which constrained deposit rates, while financial institutions provided a large and relatively stable domestic market for government debt.

Now combine those constrained borrowing costs with inflation.

If nominal GDP is growing faster than the effective interest rate the government pays, something powerful happens: the economy supporting the debt can grow faster than the cost of carrying it.

The result can be government borrowing rates that remain below the rate at which prices are rising. Essentially, the denominator grows faster than the numerator, while the interest cost attached to that numerator remains contained.

Economists Carmen Reinhart and M. Belen Sbrancia estimate that negative real interest rates liquidated government debt worth roughly 2 to 3.5 percent of GDP annually in the United States and United Kingdom during portions of the postwar period.

The easiest way to see the mechanism is to think about your mortgage.

If you locked in a 3 percent mortgage before inflation accelerated, the payment stayed fixed while wages and prices rose around it.

The debt did not disappear. It simply became easier to carry in real terms.

Great deal if you are the borrower.

Less exciting if you are lending money at 3 percent while prices rise 5 percent.

Governments can experience the same thing on a much larger scale: pay every dollar promised while inflation reduces what those dollars are worth.

Which brings us back to something Treasury just did.

Wait, Treasury Is Buying Back Bonds?

Treasury buybacks are not new, but the timing is unusual enough to get our attention.

The last regular program ran from 2000 to 2002, when the federal government was producing surpluses, paying down publicly held debt, and contemplating a future in which Treasury securities might actually become scarce.

Treasury revived a regular buyback program in May 2024.

Then, on August 19, 2026, one day after gross federal debt crossed $40 trillion, Treasury announced that it would at least double the maximum size of liquidity-support buybacks in the 10-to-20-year and 20-to-30-year portions of the market, from $2 billion to at least $4 billion per operation.

Those expanded operations begin September 9 and run through the next quarterly refunding on November 4.

Treasury’s explanation is straightforward: improve liquidity in longer-dated Treasury markets, where it says it has seen consistent strong sponsorship and a significant volume of high-quality offers.

And we want to be clear: this is not quantitative easing, Treasury is not printing money, and the buybacks do not make federal debt disappear.

Treasury itself notes that buybacks are “not expected to significantly affect privately-held net marketable borrowing as new issuance replaces securities that are bought back.”

So why do we care?

Because the rhyme is interesting.

In 2000, Treasury was buying bonds while worrying about managing a shrinking pool of government debt.

In 2026, Treasury expects to borrow another $739 billion in privately held marketable debt during the July through September quarter alone, according to its August 3 estimate.

A buyback by itself tells us almost nothing about financial repression. But the timing is hard to ignore. Treasury is becoming more active in managing longer-dated debt at the same moment the federal government’s financing needs, interest costs, and sensitivity to long-term borrowing rates are becoming more consequential.

That deserves a spot on our radar.

Not a red flag.

A breadcrumb.

There Will Be No Financial Repression Act

If financial repression eventually becomes part of the American policy mix, we doubt Congress will pass the Financial Repression Act of 2027.

There probably will not be a press conference.

Instead, the levers would likely move individually.

Rules that create more structural demand for Treasuries.

More active management of the maturity and composition of federal debt.

Pressure to keep long-term rates from becoming politically or fiscally uncomfortable.

Greater tolerance for inflation remaining above target while government borrowing costs stay constrained.

Every lever could have a perfectly reasonable explanation on its own.

The question is whether enough of them eventually start pointing in the same direction.

That is why we prefer thinking about this as a thermostat rather than an on/off switch.

THE FINANCIAL REPRESSION THERMOSTAT

We are not saying the United States is currently experiencing classic financial repression. Real yields are positive, there is no explicit ceiling on Treasury rates, Americans can move capital elsewhere, and investors are not being forced to buy government bonds.

What has changed is the incentive structure.

So What Do We Do With This? Watch the Incentives

Forty trillion got the headline. The real issue is the combination of a debt burden near postwar records and an interest bill that is consuming more of the budget.

So what do you actually do? Nothing dramatic. A larger Treasury buyback is not a reason to restructure your finances. But a few habits make sense whether this thesis develops or not.

Price everything in real terms. Stop comparing this year’s yield to last year’s yield and start comparing it to inflation. Four percent against 2 percent inflation is a 2 percent gain. Four percent against 5 percent inflation is a loss with a plus sign in front of it. Two things follow. Fixed-rate debt gets cheaper in real terms as prices rise, so think hard before trading a fixed rate for a floating one. And if what you want is protection from inflation specifically, nominal Treasuries are not that instrument. TIPS and I bonds are.

Check your escalators and your maturity wall. Pull your ten largest contracts. Any that run past twelve months without a CPI or PPI escalator are an unhedged bet on disinflation. Price that bet or renegotiate it. Then pull your debt schedule and find the year with the heaviest refinancing. If the plan only works at the rates you locked in during 2020 and 2021, that is not a plan.

Stop treating the 2010s as the base case. Two percent inflation, near-zero rates, and cheap government debt were not the natural state of the world. They were one decade. Build a case where nominal growth runs hotter than real growth for a while and see what breaks.

For our own outlook, we are watching real yields, the mix and maturity of new Treasury issuance, buyback size and target sectors, rules that create structural Treasury demand, and any Fed communication that explicitly connects rate decisions to federal interest expense.

Forty trillion dollars is the headline. The harder story is what it costs to carry it, how quickly that cost is growing, and what policymakers may eventually be willing to do about it.

Treasury’s expanded buybacks are probably exactly what Treasury says they are: market plumbing. That remains our base case. But when debt service starts setting records, the incentives change. The number is large. The policy reaction is what we are watching.

Sources and notes

Deficits and cash flow. July 2026 monthly deficit of $432.3 billion and fiscal-year-to-date deficit of $1.7988 trillion from the Treasury Monthly Treasury Statement. The calendar-adjusted July figure of roughly $332 billion and the August 1 weekend explanation are from CBO’s Monthly Budget Review. The August 2026 figure is our own preliminary estimate from the Daily Treasury Statement; the official Monthly Treasury Statement for August had not been released at the time of writing. August 2024 and August 2025 comparisons from the MTS.

Debt levels and projections. Gross federal debt first exceeded $40 trillion on August 18, 2026, per Treasury’s Debt to the Penny: $39.99 trillion on August 17 and $40.05 trillion on August 18. Debt held by the public at 101 percent of GDP in 2026 and 120 percent in 2036, and net interest of $1,039 billion in 2026 rising to $2,144 billion in 2036, from CBO, The Budget and Economic Outlook: 2026 to 2036, published February 11, 2026, Table 1-1. The statement that net interest exceeds 3.2 percent of GDP in every projection year, and that this would be its highest recorded level since at least 1940, is CBO’s own, on page 11 of that report.

A note on two vintages. Our long historical series for debt held by the public and net interest comes from OMB historical tables paired with BEA GDP. CBO’s projections come from CBO’s own accounting, which runs about 0.8 percentage points above the OMB series on average across the 64 overlapping years since 1962. In fiscal 2025 the two read 98.1 percent and 99.4 percent respectively. The gap is small enough that the shape of the chart does not depend on it, but it is why the 2025 figure in Chart 2 and the 2026 figure in Chart 1 are not on the same basis. CBO’s own historical series does not reach back past 1962, which is why the long history is OMB.

Interest burden. Net interest as a share of federal receipts, 10.46 percent in fiscal 1946 and 18.53 percent in fiscal 2025, is our calculation from OMB net interest outlays and OMB federal receipts. The 2025 reading is the highest in the series back to 1940, just above the 18.43 percent recorded in 1991. Historical net interest as a percent of GDP peaked at 3.16 percent in 1991, with 2025 at 3.15 percent.

World War II rate peg. The three-eighths of one percent bill rate and the informal 2.5 percent long bond ceiling, and the Treasury-Federal Reserve Accord of March 1951, from Federal Reserve History. Note for precision: the bill rate peg was actually abandoned in July 1947, and only the bond ceiling survived to the Accord.

Financial repression estimates. Carmen Reinhart and M. Belen Sbrancia, “The Liquidation of Government Debt.” The 2 to 3.5 percent of GDP annual figure for the United States and United Kingdom is from the published version in Economic Policy 30(82), 2015, and IMF Working Paper 15/7. The earlier NBER working paper put it at 3 to 4 percent.

The 2000 buyback program. Treasury press release, January 13, 2000. Summers testimony before House Ways and Means, November 9, 1999. The $67.5 billion program total across 45 operations from March 2000 to April 2002 is from GAO-04-485SP.

The current buyback program. Treasury quarterly refunding statement, May 1, 2024 for the program design, and the August 19, 2026 announcement for the expansion to at least $4 billion per operation in the 10-to-20-year and 20-to-30-year sectors, effective September 9 through November 4, 2026. The quotation on privately held net marketable borrowing is from Treasury’s presentation to its Borrowing Advisory Committee. The $739 billion July through September borrowing estimate is from Treasury’s marketable borrowing estimates released August 3, 2026, assuming a $950 billion end-of-quarter cash balance; these estimates are revised at each refunding.

Real borrowing rates. The realized real borrowing rate is net interest outlays divided by prior-year debt held by the public, deflated by CPI on a Fisher basis. Averages of negative 0.62 percent for 2015 to 2024 and negative 0.56 percent for 1945 to 1980 are our calculations. The fiscal 2025 effective nominal rate of 3.44 percent is calculated the same way.

We are coming up on a full years since Cracker Barrel tried to retire the Old Timer. The man in overalls leaning against a barrel, a fixture of roadside America since 1977, was replaced with a clean, minimalist wordmark. The internet noticed immediately. Within days the backlash had drawn in cable news, a competitor’s marketing department, and an endless amount of meme’s. Eight days after the new logo appeared, the company reversed course. The Old Timer went back on the sign and the whole episode entered the business school curriculum as a cautionary tale.

That is the story everyone knows. Here is the question we wanted answers to: setting the logo aside, how was the business actually doing? And can we measure whether the rebrand week left a mark, or whether Cracker Barrel’s troubles run deeper than a font choice?

At Random Walk Economics we spend a lot of time on exactly this kind of question for clients: separating what the macro economy is doing to a company from what a company is doing to itself. The tool we use, The Random Wak MAP (Market Attribution Performance), is a modified sales decomposition but instead of looking at how Sales move against the changes in customers and their average spend, we focus on the broader market trends. We recently ran one on Cracker Barrel, and the results are worth walking through, because they tell a story the headlines missed.

Three buckets

The idea behind our analysis is simple. A company’s revenue growth in any period can be sorted into three broader market trend buckets:

Price. If the whole industry raises prices, every company’s revenue rises with it. That is not skill. That is the tide coming in.

Volume. If more customers are out there spending, revenue rises too. Also the tide.

Everything else. Whatever growth is left over after accounting for industry pricing and market volume belongs to the company itself. We call this the competitive component. It captures market share gains and losses, brand strength or weakness, execution, menu decisions, and everything else management actually controls. It is the residual, and the residual is where management lives.

If a restaurant chain grows sales 5 percent in a year when industry menu prices rose 4 percent and customer activity rose 3 percent, the honest read is not that the company grew 5 percent. It is that the company underperformed its own market by about 2 points. The tide gave them 7 and they delivered 5.

How we MAPPED the Market

For the price bucket we used the US Food Away From Home CPI, the government’s measure of restaurant menu inflation. That one is straightforward.

The volume bucket deserves more explanation, because we made a deliberate choice here. The ideal market volume measure for a restaurant chain would be something like industry-wide same-store traffic. That data is not readily available in a long, consistent public series. So instead we used national Vehicle Miles Traveled, the federal count of how much Americans are driving.

VMT is not a restaurant metric but it can be used as a proxy for consumer financial health, and that is precisely why we like it. There’s a cyclical relationship between consumer spending and how much they drive whether for work, to visit family, on road trips, on errands they could have skipped. When the consumer pulls back, driving patterns change. For a restaurant chain like Cracker Barrel, whose entire location strategy is built around interstate exits and travelers, miles driven is about as close as public data gets to counting the people who might walk through the door. In fact, it’s around 90% correlated to their sales data. So read our volume bucket as a question about the customer, not the industry: is the American consumer out in the world, moving around, in a position to spend?

We know some of you might even own restaurants and are hearing different trends in traffic movement, so it’s worth a quick call-out. Our research suggests actual restaurant traffic is still negative year over year even as VMT holds up. That gap likely reflects shifting consumer habits, things like trading down, eating at home, dietary changes, rather than just financial distress. The consumer has the capacity to show up. Whether they choose to is a different question, and that distinction matters for how we interpret the results below.

Calibrating the machine: the COVID test

Before trusting any model, you should check whether it recognizes an event you already understand. We know the data is reported quarterly, and there are additional complexities related to fiscal years. As a result, the analysis will be somewhat less precise than if monthly data were available. Even so, the overall conclusion remains the same. For this framework, the event easy to pinpoint and explain is 2020. Yes, another reminder of the unfortunate pandemic era.

At the height of the pandemic, noting that many lockdowns overlapped the first and second quarter of 2020, Cracker Barrel’s sales fell more than 40 percent year over year. Our decomposition attributes more than half of that collapse to the volume bucket. VMT cratered as the country stopped moving, and a roadside restaurant chain’s revenue cratered with it. Then in 2021 the pattern ran in reverse: driving roared back, and the volume component swung from the biggest drag in the dataset to one of the biggest boosts.

That is exactly what a working model should show. When the consumer genuinely disappeared, the framework said so, loudly. Which means that when the framework points at something else, we should pay attention.

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Fifteen years of borrowed growth

Now zoom out. From mid-2011 through early 2026, Cracker Barrel’s sales grew about 30 percent. That sounds respectable until you decompose it.

Over that same window, restaurant menu inflation alone should have meant upwards of 70% growth during this time. In other words, industry pricing accounts for more than all of Cracker Barrel’s growth over fifteen years. Add the volume tailwind from a generally healthy, mobile consumer and the market handed the company roughly 4.3 percent annual growth on a silver platter. Actual growth came in around 1.8 percent per year.

The difference, about two and a half points per year, every year, for a decade and a half, is the competitive component. It is persistently negative. We run our analyses two different ways, once as a pure accounting identity (essential equal weighting) and once with regression-estimated sensitivities, and the story holds either way.

This is the finding that reframes the whole rebrand saga. Cracker Barrel was not a healthy brand that stumbled over a logo. It was a company that had been quietly losing ground to its own market conditions for fifteen years, long before anyone touched the Old Timer. The rebrand was not the disease. It was arguably a response to the disease, executed badly.

Then came August

Here is where the timing gets interesting. Heading into mid-2025, the competitive drag was running around 6 points per year, in line with its recent trend. In the two quarters spanning the logo launch, the backlash, and the messy aftermath, the drag deepened.

The usual caution applies. This is quarterly data, the rebrand was not the only thing happening, and a residual by construction absorbs everything we did not explicitly measure: menu changes, remodel disruption, pricing decisions, and plain noise. We cannot prove the logo was the only cause of the dip, and we would not claim to. But the shape of the data, a long-running underperformance that abruptly worsens around the rebrand and then partially reverts when the company retreats to familiar ground, is at least consistent with the story America watched play out on social media. The brand damage was real, measurable, and, it appears, mostly temporary. The underlying erosion is none of those things. It is real, measurable, and ongoing.

The uncomfortable present

Which brings us to today. Cracker Barrel’s sales are currently running negative year over year, down in the mid-single digits in recent quarters. Decomposed, the picture looks like this: national menu pricing is contributing roughly 4 points of growth, the consumer volume proxy is adding about another point, and the competitive component is subtracting around 10.

Read that again. The only reason the headline number is not worse is that the economy is quietly propping it up. Menu inflation and a consumer who is still out driving are together masking a company-specific decline of roughly ten points a year. If either tailwind fades, if food-away-from-home inflation normalizes or the consumer retrenches, the headline number inherits the full weight of the competitive problem.

Why this matters beyond one restaurant chain

The Cracker Barrel case is vivid because the rebrand made it public. But the underlying pattern is common, and it is the reason we build these decompositions for clients in the first place.

Most companies grade themselves on headline revenue. In an inflationary environment, that grade is inflated too. We cautioned this on a recent blog discussing how a business can post growth every year while steadily losing its position, because pricing hides the leak. And in fact we are cautioning readers that overall US Real Retail Sales are likely to be negative by mid-2027 as inflation masks the consumer’s weakened financial health. But we also want to remind readers that the reverse also happens: a well-run company in a shrinking market can look like a failure when it is actually outperforming everything around it. You cannot tell the difference from the top line. You can only tell by analyzing tides vs a captains ability to sail.

So the question worth asking about your own business is the one Cracker Barrel’s numbers answer so starkly: if the market handed you nothing next year, no price increases, no extra customers, what would your growth look like? For most companies, it’s a guess. For the ones we work with, that number is front and center.

An Excel version with even more functionality is available at the bottom of the page.

That’s way better than a free bobblehead, if you ask us.

Today is Bobby Bonilla Day. Somewhere in Florida, a 63-year-old man who last played a Major League game in 2001 just received a check from the New York Mets for $1,193,248.20. He will get one every July 1 through 2035. Today’s is the sixteenth of twenty-five.

The annual ritual is to laugh. The Mets owed Bonilla $5.9 million when they released him in 2000, and rather than pay it, they agreed to defer the money at 8 percent and spread it across twenty-five annual payments beginning in 2011. Add those payments up and you get $29.8 million. The headline writes itself: the Mets turned a $5.9 million debt into a $29.8 million albatross, and they are still paying for it a quarter-century later.

Here is the problem with the joke. The $5.9 million and the $29.8 million are the same number.

The illusion

Deferring $5.9 million at 8 percent from 2000, then paying it out from 2011 to 2035, produces payments that sum to $29.8 million because 8 percent compounding over that horizon does exactly that. The big number is not a loss. It is the small number wearing twenty-five years of interest. Discount those payments back to 2000 at the same 8 percent rate written into the deal and you land right on $5.9 million. The contract was, by construction, a wash.

So the interesting question is not “how did $5.9 million become $29.8 million.” That is just compounding, and it is not a scandal. The interesting question is the one every deferral forces: was 8 percent a good rate to pay?

The only number that matters

The answer depends entirely on what the Mets could earn on the cash they kept. If they could beat 8 percent, deferring was close to free money: hold the $5.9 million, grow it faster than the rate you owe, and pocket the spread. If they earned less than 8 percent, deferring cost them, and cutting a check in 2000 would have been cheaper. At exactly 8 percent, the coin lands on its edge.

This is where the story earns its infamy. Mets owner Fred Wilpon signed off on 8 percent partly because he believed his money was compounding at around 10 percent with his friend Bernie Madoff. On those terms the deal was not just fair; it was arbitrage. Borrow from Bonilla at 8, earn 10 with Bernie, keep the two points forever. We all know how that investment turned out. The returns were fictional, and a deferral that looked like a clever spread became a small monument to the larger illusion.

There is a second, less cynical reading the “dumb Mets” narrative ignores. The Mets did not actually park the $5.9 million and invest it. They spent it, right away, on players. Freeing that payroll helped fund a roster that reached the 2000 World Series. Deferral is not only a bet on a discount rate; it is a way to pull spending forward to a moment you value more than the future. Sometimes the return on “win now” is a pennant, not a percentage.

Move the discount rate yourself in the calculator below and watch the verdict flip. Below 8 percent, the deal bleeds red. Above 8 percent, it prints money. The entire reputation of the contract swings on one slider.

Inflation adds one more wrinkle. Bonilla’s 2035 check has the same face value as his 2011 check, but it will not buy the same amount. That is the trap in every big future-dollar headline. The payment may be fixed, but the value is not. In a stickier inflation environment, where we expect CPI to remain in the 3% to 4% range, the timing of cash matters even more. Rates rise, discount rates move, and yesterday’s “great deal” can become tomorrow’s expensive lesson. That is true for Bobby Bonilla. It is true for households. It is true for businesses deciding whether to buy, build, borrow, lease, or defer.

Now the part that is actually about you

Here is why Bobby Bonilla Day is worth more than a laugh: you make his decision all the time, usually without naming it.

Every time you choose money now over money later, you reveal a personal discount rate, and the smart move is always the same. Find the rate baked into the offer, then compare it to what your own money can reliably earn. A few places this shows up:

• Social Security. Delaying benefits can work like a quiet Bobby Bonilla trade. The formal 8 percent delayed-retirement credit applies after full retirement age, not all the way from 62, but the basic idea is similar: you give up income today in exchange for a larger guaranteed monthly check later. For someone born in 1960 or later, claiming at 62 produces 70 percent of the full benefit, while waiting until 70 produces 124 percent. That is not exactly Bonilla’s contract, but it rhymes: defer the cash, get a richer future stream. The trade pays off if you live long enough and if the risk-adjusted return from claiming early and investing the checks would not beat the larger Social Security benefit.

• Lump sum versus annuity. Pension buyouts, lottery payouts, and structured settlements all ask the Bonilla question directly. Do not eyeball the totals. Back out the implied return the payment stream is paying you, then hold it up against your own hurdle rate.

• Paying off the mortgage. Retiring debt is a guaranteed return equal to your interest rate. Bonilla’s deal was a loan; your mortgage is your version of the same math, and “should I prepay or invest” is just “which rate is bigger.”

• Business investment. A company faces the same calculation when deciding whether to build a plant, buy equipment, launch a product, hire ahead of demand, or make an acquisition. The question is not just “will this generate revenue?” It is “will the future cash flows clear our cost of capital?” A project that looks attractive when capital costs 5 percent can die when capital costs 10 percent, even if nothing else about the project changed.

• Deferring costs. Businesses also make Bonilla-style choices when they stretch payments, lease instead of buy, finance equipment, delay maintenance, or structure compensation over time. Deferral can create flexibility, but it is not free. It only works if the cash kept today earns, protects, or unlocks more value than the rate being paid tomorrow.

The “run your own offer” tab in the tool does exactly this. Type in any lump-sum-versus-payments choice and it returns the built-in rate and tells you which side the math favors.

Find the Rate

That is the whole lesson.

Bobby Bonilla Day is not really about $29.8 million. It is about 8 percent.

The Mets paid 8 percent to wait. Bonilla earned 8 percent for waiting. Whether the deal was brilliant or dumb depends on one question: could the Mets do better with the money they kept?

That is the question hiding inside countless household and business decisions. Claim now or later. Take the lump sum or the payments. Pay down debt or invest. Buy, lease, borrow, build, or defer.

The totals are the distraction. The rate is the story.

That is what the tool lets you test. Change the discount rate and the verdict changes. Below 8 percent, Bonilla wins. Above 8 percent, the Mets had a case.

So maybe Bobby Bonilla Day is not a punchline. It is a reminder: before you chase the big number, find the rate.

Happy Bobby Bonilla Day.

[Run the Bobby Bonilla discount-rate tool on GitHub].

As we encounter more leading and lagging relationships we want to bring up a recent positive development in loan issuance by banks however from a different lens that may not be so rosy as the current figures suggest. Most people assume that when something big happens in the economy, everything else adjusts pretty quickly. Rates go up, spending slows down. Banks pull back, lending dries up. The problem is that is not really how it works. The economy is less like a light switch and more like a house trying to find the right temperature.

The thermostat problem

Imagine it is the start of summer. The weather report for today shows a scorching heat by mid afternoon. You wait to react since the morning temperature is still very nice. Birds are chirping and the hot coffee you’re drinking isn’t making you sweat yet. As the afternoon heat begins to reach record levels, you walk over to the thermostat and turn it down, knowing that this might hurt the old bank account at the end of the month but comfort comes first. After 30 minutes the house is still a bit warm. Nothing feels different yet. That is because cooling takes time. The air conditioner kicks on, starts pulling heat out of the rooms, and only after some time does the house actually start to feel different.

THE ANALOGY IN PLAIN TERMS

Interest rates = the warning from the weather report

Economy = the decision to change the temperature on the thermostat

Banks = the actual temperature in the house

Now stretch that idea out over months instead of hours. When banks raise interest rates to cool an overheating economy, the system does not snap to attention. The house is still holding onto yesterday’s heat.

Why the economy takes its time

When rates move, businesses do not cancel projects the next morning. Most companies spend months building their annual plans. Those plans reflect goals they set well before any rate decision was made, and changing them mid-year costs time and money. So the plan keeps going, at least for a while.

Consumers behave the same way. A family that has already listed their house and started touring new ones does not simply stop because mortgage rates nudged up a quarter point. They are already in motion. The rate change is real, but the response takes time to filter through all the decisions that are already in progress.

This is not a flaw in the system. It is just how large, complex economies work. The research is fairly consistent on this: the full effect of a rate change tends to show up in economic output roughly 2 years later. The weather report was given but you’re still drinking your coffee before the heat wave comes.

Banks have a second lever: loan issuance

Interest rates are not the only thing banks can adjust. Loan issuance, meaning how freely or cautiously banks extend credit to businesses and consumers, is another way the banking system responds to what it sees in the economy. When conditions feel risky, banks tighten. When things look stable, they open up.

The catch is that loan issuance follows the same delayed pattern. Banks are not reacting to what they think is coming. They are reacting to what they have already seen. And that lag runs about a year as well.

The banking system is not always trying to predict the economy. It is responding to it, about a year late.

What the recent data is actually telling us

This is where it gets interesting for 2026. Commercial and Industrial loan activity picked up as the year began, and the natural reaction is to take that as an optimistic signal. Banks are lending more, so they must see good things ahead. Growth is on the way.

But given what we know about timing, that interpretation misreads the signal. The uptick in lending is not banks forecasting a strong 2026. It is banks responding to the genuine momentum the economy built throughout 2025. They are adjusting the thermostat to match a temperature that is already been impacting the house.

One of the more useful ways to see this relationship clearly is through industrial production, which the Federal Reserve’s Board of Governors considers the main driver of swings in national output over the course of a business cycle. When industrial production trends are shifted forward by 13 months, they track closely with what happens to loan issuance afterward. The leading relationship is there in the data.

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What does that chart suggest right now? Our current base case still calls for growth through 2026. But industrial production trends on an annual year-over-year basis are already starting to plateau. A cyclical slowdown toward the latter half of 2026 is something we are watching closely and have been expecting when the forecast was put in place 18 months ago. If history holds, loan issuance would continue growing through 2026 as it catches up to last year’s strength, but the picture heading into 2027 and 2028 warrants real caution.

Three things worth keeping in mind

1. Loan growth right now is a lagging story, not a leading one

Rising C&I loan volumes in early 2026 reflect conditions from 2025. Using them as forward guidance for economic performance will lead you to conclusions that the underlying data does not actually support. Pair loan issuance trends with leading indicators like industrial production before drawing any outlook conclusions.

2. Credit standards should be reexamined for tightening in anticipation of 2027

This isn’t likely something the banking world wants to hear considering the decline that took place in through 2025 but if the cycle plays out as history suggests, weaker economic conditions in late 2026 and into 2027 will eventually show up in credit quality. Institutions that wait to see stress in portfolios before adjusting underwriting standards are, by definition, already behind. The time to build in conservatism is when loan demand still looks healthy. Focus on the next upcycle in the economy and get ahead of that opportunity.

3. Communicate the lag clearly to stakeholders who expect quick answers

Board members, investors, and clients often want a direct line between today’s rates and tomorrow’s performance. The thermostat analogy is genuinely useful here. The house does not cool in real time, and neither does the economy. Helping stakeholders understand that delay is part of managing expectations well before any slowdown becomes visible.

Most people hear “trade agreement review” and think it’s background noise. But if your business touches North American supply chains, manufacturing, agriculture, energy, logistics, you name it, the July 2026 USMCA checkpoint is worth your attention.

Here’s the setup: All three countries (U.S., Canada, Mexico) need to confirm they’re extending the agreement for another 16 years. If anyone raises concerns, the deal enters an annual review cycle, meaning uncertainty could drag on for a decade. That’s not exactly the stable planning horizon most businesses want.

So what should you actually do about it? Let’s skip the policy jargon and get practical.

What to Monitor Right Now

Energy and investment protections. The U.S. is likely to flag Mexico’s recent energy reforms, particularly around oil and gas. If your business depends on cross-border energy flows or you’re in sectors tied to power-intensive production, keep an eye on how these talks evolve. Changes here could ripple into pricing and contract terms.

Chinese investment screens. Negotiators are zeroing in on “back-door” pathways where Chinese goods manufactured in Mexico could enter the U.S. market under USMCA rules. If you’re sourcing from Mexico, expect stricter origin requirements and possible audits on where components actually come from.

Agricultural access. GMO corn, biotech crops, and sustainability standards are all on the table. Food and ag businesses should watch whether new restrictions get layered in, especially around environmental or climate-smart certifications.

Tariff resets. Steel, aluminum, and copper currently face an ever evolving tariff implication. Given that Mexico and Canada are top suppliers, there’s pressure to adjust these. If you’re in metals or downstream manufacturing, this could shift your cost structure significantly.

Questions to Ask Your Suppliers and Customers

Don’t wait for headlines to tell you what changed. Have these conversations now:

To suppliers in Mexico or Canada:

• “What percentage of your inputs come from outside North America?”

• “How are you documenting origin for USMCA compliance?”

• “If rules of origin tighten, what’s your Plan B?”

To customers relying on cross-border goods:

• “Are we building tariff escalation clauses into our contracts?”

• “What’s your tolerance for supply chain shifts if sourcing needs to move?”

• “Should we lock in longer-term agreements before July?”

To your logistics partners:

• “What bottlenecks are you seeing at key border crossings?”

• “How quickly can we pivot shipment routes if needed?”

Early Moves to Consider

Build scenario assumptions. Don’t plan for one outcome. Sketch out three cases:

• Base case: Agreement extends smoothly, minimal changes.

• Upside case: Tariff reductions on metals, streamlined customs, expanded energy market access.

• Downside case: Annual review cycle kicks in, origin requirements tighten, sector-specific disputes drag out.

Run your budget, margins, and sourcing plans through each scenario. Where do you get squeezed? Where’s the opportunity?

Review sourcing flexibility. If 80% of a critical input comes from one Mexican supplier, that’s fine, until it isn’t. Map out alternative sources (even if more expensive) so you’re not scrambling in Q3 if something shifts.

Revisit pricing and contract clauses. If you’re negotiating long-term deals that span beyond July, consider language that allows for adjustments based on tariff or regulatory changes. We’ve seen companies get stuck with fixed-price contracts that became underwater when trade rules moved.

Talk to your finance team about FX exposure. Trade uncertainty often amplifies currency swings. If your cost base is in pesos or Canadian dollars and your revenue is in USD (or vice versa), now’s a good time to review hedging strategies.

We’ve written about rising supply chain pressures and how they can affect pricing, particularly producer prices, months down the line. With ongoing geopolitical tensions worldwide, supply chains are likely to stay tight. Any changes to USMCA that further restrict trade between the nations would only add fuel to the fire.

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The Bigger Picture

Here’s the thing: even if the July review goes smoothly, the attention on USMCA means compliance is about to get more scrutiny, not less. Customs audits, origin documentation, traceability requirements, all of that tightens when trade deals are under the microscope.

Think of this less as a one-time event and more as a shift in how North American trade gets managed going forward. The companies that treat it seriously now will have cleaner operations, better supplier relationships, and fewer surprises when the next checkpoint rolls around.

We’re not saying panic. We’re saying prepare. July isn’t that far away.

Of course, conditions can shift quickly as policy decisions and geopolitics reshape the environment. For those interested, we’re sharing the Excel version of the dashboard so you can monitor the signals yourself. Just comment below and we’ll send it your way.

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At the end of a quiet cul-de-sac lives a dog named Kona. Part husky, part German shepherd, which means she is, to put it charitably, a very vocal animal. But if you pay attention, the noise is actually a communication system. A loud, sustained bark means “Intruder!” (or, more likely, another Amazon package). A single chirp, like a smoke detector with low batteries, is her unmistakable signal for “I have to go outside, now.” And the pathetic, persistent whimper? That one’s reserved exclusively for when Gam Gam arrives, her all-time favorite person on the planet.

The noise can be loud, distracting, and yes, annoying. But once you learn the signals, you always know exactly what’s going on.

The bond market works the same way.

The bond market is often called the “smart money” for a reason. While equity markets focus on the next quarter’s earnings call, bond traders are looking at the next decade’s structural shifts. For executives and board members, the bond market isn’t just a place to borrow; it’s a translation layer for the real economy. This week, we’re breaking down the five signals that actually matter for your 2026 strategy, turning “basis point” noise into actionable business intelligence.

The Noise vs. The Signal

A lot of people treat the bond market like background music: until it starts playing heavy metal. In 2026, we’ve moved past the “transitory vs. sticky” inflation debates of the early 20s and into a new era of structural volatility. If you aren’t watching the signals below, you’re essentially flying a plane without a weather radar.

Here is how to translate the “bond-speak” into the language of the boardroom.

1. The 10-Year Yield: Your Universal Hurdle Rate

What changed: After years of flirting with historical lows, the 10-year Treasury yield (currently hovering around 4.2–4.5%) has established a new “floor.”

What it means: This is the base cost of capital. If the “risk-free” rate is at 4.5%, your internal hurdle rate for new projects needs to be significantly higher to justify the risk. It’s no longer about “can we get the loan?” but “does this project’s ROI beat the bond market?”

What to do this quarter: Audit your CAPEX pipeline. Any project that was greenlit when the 10-year was at 1.5% needs a reality check. If the math doesn’t work at 5%, it might be time to pivot resources toward higher-margin initiatives.

2. Credit Spreads: The Corporate Confidence Meter

What changed: Credit spreads, the extra interest companies pay over Treasuries, have tightened and widened sporadically as markets digest “soft landing” versus “hard landing” scenarios.

What it means: When spreads are narrow, the market is telling you that they aren’t worried about your neighbors going bust. When they widen, it’s a sign that lenders are getting picky. This is the ultimate “risk appetite” gauge.

What to do this quarter: If spreads are tightening, it’s a window for refinancing. Don’t wait for the Fed to cut rates; if the spread is low, your specific cost of borrowing might be as good as it gets for a while.

3. The Yield Curve Shape: The Speed Limit

What changed: We’ve spent a lot of time in “inversion” (short-term rates higher than long-term), but as of 2026, we are watching for a “bear steepener”: where long-term rates rise faster than short-term ones.

What it means: An inverted curve is a “recession warning.” A steepening curve is the market saying, “We expect growth, but it’s going to cost you.” It represents the market’s expectation of the economy’s speed limit.

What to do this quarter: If the curve is steepening, lock in long-term debt now. If it’s still inverted, keep your powder dry and stay liquid. The market is predicting a bump in the road; make sure your balance sheet has enough shock absorbers.

4. Term Premium: The Uncertainty Tax

What changed: For nearly a decade, the “term premium,” the extra compensation investors demand for the risk of holding a bond for a long time, was practically zero. In 2026, it’s back with a vengeance.

What it means: This is essentially an “uncertainty tax.” Investors are no longer sure about fiscal deficits or future inflation, so they’re charging a premium for the unknown. According to recent data from the New York Fed, this shift can add 50 to 100 basis points to borrowing costs regardless of what the Fed does.

What to do this quarter: Budget for volatility. When the term premium is high, “fixed-rate” isn’t just a preference; it’s an insurance policy. Avoid floating-rate exposure if you can help it.

5. Real Rates: The Truth Serum

What changed: Real rates (nominal rates minus inflation) have moved into positive territory.

What it means: This is the “Truth Serum” of the economy. When real rates were negative, money was essentially free, which subsidized a lot of bad business models. Positive real rates mean capital finally has a cost again. This separates the sustainable businesses from the “zombies.”

What to do this quarter: Focus on cash flow. In a positive real-rate environment, “growth at any cost” is a death sentence. Investors and lenders are looking for EBITDA, not just top-line “potential.”

The Bond Signal Dashboard

The five signals are flashing a consistent theme this month: a broad, coordinated easing of financial conditions. Every single indicator moved in the same direction in February, and together they tell a story worth paying attention to.

The 10-year Treasury yield fell 29 basis points to 3.97%, the sharpest single-month move in yields since February 2025. That is not noise. When the base cost of capital drops that quickly, it reprices everything sitting in your CAPEX pipeline. Projects that were marginal at 4.25% look meaningfully different at 4.00%, and if the trend continues toward the low 3s, you will want to have already identified where you want to deploy capital.

Real rates told the same story. The TIPS-based real rate dropped 18 basis points to 1.72%. Capital still has a real cost, which means the “zombie company” filter is still running, but the pressure eased. Businesses with solid cash flow and deferred investment decisions may find the window beginning to open.

The yield curve flattened slightly, sliding from 0.74% to 0.59%, but remains comfortably positive. The curve is still in “growth expected” territory, not sending any recession warning. The modest flattening is worth watching, but one month does not make a trend.

The one signal moving against the grain is the investment grade credit spread, which widened 11 basis points to 0.86%. It remains in moderate territory, but it is the only indicator in the dashboard that got worse in February. When borrowing costs elsewhere are falling but corporate spreads are creeping up, lenders are starting to quietly ask questions even as the macro picture improves. That tension is worth monitoring next month.

The term premium pulled back 9 basis points to 0.52%, suggesting slightly less anxiety about long-term fiscal uncertainty than January. Still elevated by pre-2022 standards, but the direction is encouraging.

The Bottom Line

The bond market isn’t trying to confuse you; it’s trying to tell you the truth about the future. By watching these five signals, you can move from reacting to the news to anticipating the shift.

Just like Kona, once you learn the vocabulary, the noise becomes signal.

In 279 BC, King Pyrrhus of Epirus stood on a Roman battlefield surrounded by the wreckage of another victory. His army had fought brilliantly. The Romans had retreated. By every visible measure, he had won again.

But the butcher’s bill told a different story. His best officers were dead. His veteran soldiers were gone. His army, technically victorious, was hollowing out from the inside. When an aide congratulated him on the triumph, Pyrrhus reportedly replied: “One more victory like this and we are lost.”

He was right. He eventually abandoned the campaign entirely, unable to sustain the cost of his own success. Rome, battered but deep in reserves, recovered and went on to dominate the ancient world. Pyrrhus won every battle and lost the war.

Twenty-three centuries later, his name lives on as a warning: a Pyrrhic victory is one where the cost of winning exceeds the value of the prize.

Today’s retailers and brand managers are walking into their own version of that battlefield. The revenue numbers look like victories. The topline is growing. The reports read well. But strip out inflation, and many of those wins start to look a lot like Pyrrhus, technically triumphant, strategically depleted.

This is the Revenue Ruse: when inflation writes your growth story, and volume stays home.

Why This Matters More Than It Used To

In a low-inflation environment, nominal and real growth track each other closely enough that the distinction barely matters. When inflation runs hot, that relationship breaks down. A business posting 4% revenue growth in a 4% inflation environment has not grown at all in any meaningful sense. It has stood still while the numbers moved around it.

The danger is that most performance dashboards, bonus structures, and investor presentations are built around nominal figures. Revenue is revenue. Growth is growth. The ruse works because the headline is technically true. But the underlying business, measured in units sold, customers served, and market share captured, may be stagnant or worse.

Here’s the key insight that often gets missed: inflation doesn’t just distort revenue—it also acts as a barometer for the underlying costs on your P&L. When your topline rises due to price effects, the composition of your costs becomes even more critical. Some costs are sticky, some are flexible, and some track inflation closely. Understanding which costs are driving your margin erosion is just as important as tracking volume. Winning the revenue battle is meaningless if the hidden cost structure is quietly bleeding you dry.

This is how Pyrrhic Performance takes hold at the firm level. You win the revenue battle and quietly lose the volume war, and sometimes the cost war too.

Getting in Front of It: Four Strategies

Recognizing the ruse is step one. Responding to it is step two. Here are four ways to get ahead of inflation-flattering toplines before they distort your decisions.

Track volume metrics alongside revenue, always. Make unit volume, transaction count, and customer count first-class metrics in every report. If revenue is up 5% but units are flat or down, that is not growth. That is a price effect, and it deserves a different strategic response than genuine demand expansion. Build this into your dashboards now, before the flattery becomes habit.

Map costs as carefully as revenue. Inflation-driven revenue gains can mask creeping cost pressures. Use inflation as a signal to examine which parts of your cost structure are rising and why. Raw materials, logistics, labor, or overheads may behave differently, and knowing where your expenses are concentrated lets you make smarter investment and pricing decisions.

Stress-test your pricing power. Inflation-driven revenue gains can mask the fact that you are steadily pricing out segments of your customer base. The question is not whether customers are still buying today; it is whether they will absorb another round of price increases tomorrow. Segment your customer data by price sensitivity and model what happens to volume if prices stay elevated or climb further. Know where your floor is before you need it.

Reframe your planning assumptions. If your 2026 revenue plan assumes continued nominal growth, build a parallel scenario that holds prices flat and asks what volume would need to do to justify the same investment. This is not pessimism; it is precision. Similarly, model how cost pressures behave under different inflation scenarios; because your P&L is only healthy if the growth story is profitable, not just nominally impressive.

Invest in real demand creation, not just price capture. When inflation inflates your topline, there is a temptation to let it do the work and cut back on the harder investments in customer acquisition, product development, and market expansion. Resist it. The businesses that come out of an inflationary period in the strongest position are the ones that kept building real demand even when the numbers looked fine without it. Volume growth is the only kind that compounds.

The Bottom Line on the Topline

Retail sales will likely grow over the next two years. That is the honest forecast. But growth is not a monolith. Nominal gains driven by price are real in accounting terms and nearly invisible in strategic terms. The Revenue Ruse is not about fraud or manipulation; it is about how easy it is to read a flattering number and stop asking questions. There are recent historical periods when Inflation Adjusted Retail Sales have gone negative; a relatively good gauge to say many company’s profitability was in jeopardy.

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If global supply chains were a highway system, the Panama Canal would be one of those massive interchanges with 12 lanes, flashing lights, and a sign that reads: If this closes, everyone is going to be late.

So when headlines hit saying Panama’s Supreme Court effectively kicked a Chinese-linked company out of operating the ports at both ends of the canal, it was understandable that supply chain folks did a collective double take.

After nearly a year of tariff negotiations, trade realignments, and geopolitical muscle-flexing, the idea of a major shipping node changing hands feels… ominous.

Let’s break down what actually happened, why it matters, and why, at least in the short term, this is more of a yellow light than a red one.

Panama’s Supreme Court ruled that long-standing contracts allowing Panama Ports Co. (owned by Hong Kong conglomerate CK Hutchison) to operate the ports of Balboa (Pacific side) and Cristóbal (Atlantic side) were unconstitutional.

Think of it like discovering that a 25-year lease on the busiest loading docks in town was signed on a napkin instead of a proper contract.

Those concessions are now void. The ports will be re-auctioned. And Chinese-aligned firms are almost certainly going to be kept out of the bidding.

Cue the geopolitical commentary, dramatic headlines, and a lot of speculation about “control of the canal.”

One important clarification on this news is that these ports are not the Panama Canal itself. That is left to the responsibility of the Panamanians. Think of the ports as the truck stops at the entrance ramps, not the highway itself.

If you’re responsible for moving goods or even receiving imported goods, this is the part you should tape to your monitor. As of now the assumption would be:

• Workers stay employed

• Temporary operators are lined up

• No immediate port shutdowns

The canal is likely to be under a magnifying glass as everyone fears Pandemic supply chain pressures or even headaches from the Suez Canal over the years.

Which means you’re unlikely to see:

• Sudden canal bottlenecks

• Immediate freight rate spikes

• Ships rerouting in mass

In supply chain terms, this was handled like a controlled lane closure at 2 a.m., not a bridge collapse during rush hour.

Panama knows exactly how critical these ports are. They also know that global trade has zero patience for “we’ll figure it out later.” So in the near term, cargo keeps moving. Containers still stack. Ships still transit.

Why This Still Matters for Supply Chains

Now for the longer lens. This ruling is part of a broader trend that supply chains can’t ignore: logistics infrastructure is no longer neutral ground.

Ports used to be like rental cars. Whoever paid got the keys. Now they’re more like airports or data centers: politically sensitive, closely watched, and strategically filtered.

Two implications matter most.

1. Less tolerance for Chinese shipping dominance

If U.S. or U.S.-aligned operators end up running these ports, expect:

• Less preferential treatment for Chinese carriers

• More scrutiny of transshipment flows

• Alignment with Western trade, sanctions, and compliance regimes

That doesn’t mean Chinese goods stop moving but it does mean friction increases.

And friction in supply chains almost always shows up as cost.

Ironically, this could put upward pressure on goods shipped into countries with fewer tariff barriers, as supply shifts toward “friendlier” trade lanes and compliant operators.

2. Tighter compliance and reporting standards

Expect more:

• Cargo documentation requirements

• Data transparency

• Regulatory oversight

Individually, these steps sound boring. Collectively, they add time, labor, and administrative cost. Again, nothing explodes overnight. But the baseline cost of moving goods inches higher.

Why Timing Matters: Pressure Was Already Building

This is where context really matters. Even without Panama, supply chains have been under growing strain. The Global Supply Chain Pressure Index from the Federal Reserve Bank of New York tells a pretty clear story.

Since early 2024, pressures have been trending upward. In December 2025, the index crossed above zero, a broad signal of tightening conditions. The Global Supply Chain Pressure Index leads Producer Prices by 8 months. This would suggest further pressure on Producer Prices well into the second half of 2026.

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In other words, this Panama ruling didn’t light the fire but it may add fuel. None of that screams “crisis,” but it does whisper “plan ahead.”

A few practical strategies:

1. Stress-test routing assumptions

a. Don’t assume yesterday’s cheapest lane stays cheapest. Model alternatives now.

2. Revisit pricing and margin buffers

a. If logistics costs tick up in 2026, where does that land on your P&L?

3. Diversify logistics partners

a. Over-reliance on one carrier, one port, or one region is increasingly risky.

4. Invest in visibility

a. Better data beats faster reactions. Know where your goods are—and why they might slow.

5. Communicate early with customers

a. The companies that explain cost pressures before they hit invoices preserve trust.

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Back in April 2025, we made a bold choice: stick with our forecasts in spite of the noisy headlines following liberation day (see our post Small Shoes and Big Lessons). Nine months later, here’s how our predictions held up against reality, and why sometimes the best strategy is refusing to chase every headline.

The Small Shoes Experiment

In our “Small Shoes and Big Lessons” blog back in April, we made what seemed like a crazy decision: hold onto all of our forecasts for manufacturing activity, inflation, wages, and consumer spending, no matter how tempting it became to revise them as conditions shifted throughout the year.

These weren’t fresh predictions made with 20/20 hindsight. Every single forecast was locked and loaded in Fall 2024, back when most people were still debating whether we’d see a “soft landing” or something messier. We decided to resist the very human urge to constantly tweak our outlook every time new data dropped or headlines screamed about the latest economic drama.

Why? Because we’ve learned that leaders don’t just want accurate forecasts, they want consistent ones they can actually plan around.

The Report Card

So how did we do? Let’s rip off the band-aid and see where our forecasts landed compared to what actually happened:

What We Got Right (And Why)

• Industrial Production Discipline: Our outlook anticipated modest, uneven manufacturing growth with improvement later in the year. This view was grounded in inventory dynamics, investment trends, and structural reshoring activity, which helped manufacturing avoid a double-dip despite persistent recession headlines. (See What a Boat Trip Taught Us About Planning)

• The Inflation Story: We called the mid-year cooling followed by second-half firming way back in March. While everyone was either panicking about persistent inflation or celebrating premature victory laps, we stuck to our view that the disinflationary trend would stall and reverse. The key insight? Demographics and wage pressures weren’t going anywhere, and the Fed’s tools were blunt instruments for these particular problems. (See Don’t Let Inflation Expectations Ruin Date Night)

• Fed Patience: Our January prediction that the Fed would take a “wait-and-see” approach rather than cutting rates throughout the year proved spot-on. While markets kept pricing in dramatic pivots, we recognized that central bankers learned some hard lessons from the 2021-2022 inflation surge. Or perhaps they doubled down on the same patience they exerted then. Either way, there policy tone shift throughout the year has a role to play in 2026. (See Gold, Drink Tickets, and the Fed's Money Supply Dance)

• Consumer Resilience: Perhaps our boldest call was predicting that consumer spending would strengthen in the second half after early-year softness. This went against the prevailing “consumer exhaustion” narrative that dominated headlines through spring. But we saw underlying fundamentals, employment, wage growth, and household balance sheets, that suggested reports of the consumer’s death were greatly exaggerated. (See Buckle Up, Economy! A Roadmap to Consumer Spending in 2025)

The One That Almost Got Away

Our labor market call deserves a “close” rather than a clean hit. We predicted structurally tight conditions with job openings exceeding available workers, especially early in the year. While the broad direction was right, labor markets remained tighter than historical norms, the gap between openings and workers narrowed more than we anticipated by year’s end. (See Our Take on the Labor Market: Socks over Soundbites)

The lesson? Even when you’re directionally correct, the magnitude and timing can surprise you. Labor markets proved more dynamic than our models suggested, with both supply and demand adjusting faster than expected. Although there is some weakness in the labor market, we aren’t raising an alarm bell.

The Still-Unfolding Story

Our tariff timing call remains the most interesting wildcard. We predicted that tariff noise would exceed measurable economic impact in 2025, but that larger risks would emerge in 2026-27 as the full implementation and retaliation cycles played out. Through most of 2025, companies remained cautious about passing price onto the consumer. We remain focused on whether they will be in 2026.

The immediate 2025 impact was indeed more bark than bite, with businesses adapting faster than pessimists predicted. But 2026 is still young, and the longer-term structural effects of trade policy shifts are just beginning to percolate through supply chains and investment decisions.

Why Sticking to Our Guns Worked

The real victory here isn’t just getting most calls right, it’s demonstrating the value of forecast consistency. Throughout 2025, every time new data hit or headlines screamed about some new crisis, we had decision-makers asking: “Are you changing your outlook?”

Our answer was always the same: “Nope, still tracking to plan.”

That consistency allowed business leaders to make longer-term strategic decisions without constantly second-guessing their assumptions. It helped public entities budget and plan infrastructure projects with confidence. And it gave individuals a stable framework for thinking about everything from career moves to major purchases.

The Anti-Whiplash Strategy: In a world of hot takes and constant revisions, sometimes the boldest move is holding the line. Not because we’re stubborn (okay, maybe a little), but because good forecasting is about identifying durable trends, not chasing every data point.

Focus on Fundamentals: Our forecasts worked because they were grounded in structural factors: demographics, productivity trends, policy frameworks: rather than trying to time every cyclical twist and turn. These fundamentals move like glaciers: slowly, but with enormous force once they get going.

Lessons for 2026 and Beyond

What does this exercise teach us about forecasting in an uncertain world?

First, resist the revision temptation. Every new piece of data seems urgent and game-changing in the moment. Most of the time, it’s just noise around a signal you’ve already identified.

Second, communicate your confidence levels. Notice we didn’t claim perfect foresight. We had hits, near-misses, and open questions. Uncertainty isn’t a bug in economic forecasting: it’s a feature. Acknowledge it upfront.

Third, focus on what matters for decisions. Our clients didn’t need us to predict exactly when inflation would bottom out to the decimal point. They needed to know the broad direction and timing so they could plan accordingly.

We aren’t saying revisions aren’t inevitable, but we watched the rollercoaster ride from other economists that seemed more reliant on headlines and sentiment than data...

As we head into 2026, we’re taking the same approach: identify the key structural trends, communicate them clearly, and then have the discipline to stick with our analysis even when the headlines get noisy.

What forecasting lessons have you learned from your own planning challenges? Share your thoughts and experiences: we’d love to hear how you’ve navigated uncertainty in your own decision-making.

The punchline? Don’t panic, adapt. Diversify who you sell to, mix up the product lineup (yes, even low‑alcohol), add experiences, rethink marketing, and boost efficiency. Demographics may be destiny, but strategy keeps the glass half full.

Family and friend gatherings during the holiday season can come with that unique annual mix of joy, nostalgia, and existential culinary dread. Many of us know the pain of finishing one dinner, stuffed to the point where your stomach is filing a formal complaint only to immediately race to your in-laws’ house so you can graciously overindulge in a second meal. All in the name of not offending the person who spent eight hours roasting a turkey large enough to qualify for its own ZIP code.

And maybe you were the one who put yourself through the oven-side Hunger Games this year. But no matter where you eat or how many folding tables (with last year’s cranberry sauce stains hiding under a “festive” tablecloth) get added to accommodate the crowd, there’s always one staple on the holiday table that can help take the edge off the holiday: a bottle of wine.

Nothing slows down the chaotic holiday momentum quite like that pleasant pop of a cork. Choose your grape varietal, choose your color; red, white, or whatever will pair with three consecutive meals.
So, in the holiday spirit, let’s talk about wine.

You’ve probably seen the headlines about declining alcohol consumption in the U.S., especially among younger generations who have apparently decided that a multi-thousand-year tradition of fermented yeast isn’t as appealing as kombucha, electrolytes, and having clear skin. Whether this trend has legs remains to be seen, but we can zoom in on the wine industry to see what demographic patterns may be quietly shaping its future.

Naturally, we added a layer of modeling, because what is economics if not the adult version of “connect the dots”? We examined historical age ratios as a percentage of total population and pulled in World Bank forecasts to estimate how the population’s shifting age structure could influence wine demand.

After a few iterations (and only minimal arguing with our spreadsheets), we arrived at the results below.

The chart suggests a notable downside pressure on wine consumption in the early 2030s. The main demographic culprit? A projected decline in the population density of Millennials and Gen X, traditionally stronger wine-consuming age range, and a growth in the 70+ population.

This reveals something interesting about wine’s core consumer dynamics:
Younger and middle-aged adults tend to drive consumption, though there’s a dip among 40–49-year-olds who are likely busy raising teenagers or are deep enough into middle management that their nightly beverage of choice becomes “whatever reduces emails.”

Our research highlighted a strong inverse relationship between U.S. fertility rates and wine consumption. The pattern we noticed was the following:

• In the 1960s and ’70s, fertility declined → wine consumption rose.

• Late 1980s into early 1990s. fertility rates modestly grew → wine consumption declined.

• Since 2008, fertility has fallen again → similar pattern emerges with wine flowing again.

But with expectations for fertility rates to plateau, this likely suggests headwinds ahead.

As for older adults, consumption appears to decline as we age, and a nice nudge from our doctors who suggest replacing the nightly Cabernet with a nice walk.

More recent data also shows that wine consumption growth has slowed to levels not seen since the 1990s. This may indicate a shift in overall behavior and preferences. Supporting this, the Wine Market Council’s survey, summarized by Research Director Christian Miller, reveals:

“What is interesting about this change, is that despite all the talk about young consumers reducing alcohol, the largest erosion we found was in Baby Boomers - consumers over 60 years of age,”

So while social media loves to blame Gen Z for everything from the housing market to napkin usage, in this case, the Boomers may be the demographic we can point some fingers at.

Simply put, the wine industry faces demographic headwinds in the coming years. Headwinds that could intensify if the broader shift toward health consciousness continues.

And although our own dinner tables will surely attempt to prop up the industry this season (we’re already deciding which bottles to open first), it’s worth stepping back to consider what producers and wine seller should be thinking about:

Whether you’re a winery, a distributor, or any business staring down structural headwinds, the takeaway isn’t panic. It’s adaptation. Demographics move slowly, but strategy does not. Here are five actionable ways to respond when your core customer base starts aging out.

1. Diversify Who You’re Selling To

If your demand is concentrated in one age group, geography, or income bracket, that’s a risk exposure. Explore adjacent customer segments rather than chasing entirely new ones. For wine, that might mean premiumizing for high-income older consumers while simultaneously developing entry-level or experience-based offerings for younger adults. For other industries, the same logic applies. Ask where your next “near-neighbor” customer lives.

2. Expand the Product Mix Without Abandoning the Brand

Diversification does not require brand whiplash. Low-alcohol options, non-alcoholic alternatives, ready-to-drink formats, or limited seasonal releases can hedge against changing preferences without eroding your core identity. In any industry, incremental product extensions often outperform moonshots when consumer behavior is shifting.

3. Integrate Services, Not Just Goods

As product demand flattens, services can stabilize revenue. Tastings, memberships, education, events, subscriptions, and experiences turn one-time buyers into recurring customers. This strategy applies well beyond wine. When demand cycles become less predictable, recurring engagement matters more than unit volume.

4. Rethink How and Where You Market

If traditional channels are losing traction with younger cohorts, meet them where they already are. That may mean more direct-to-consumer, experiential marketing, partnerships, or data-driven targeting rather than broad campaigns. The goal is not to be trendy, but to be visible in the right places at the right moments.

5. Invest in Productivity, Not Just Growth

When demand growth slows, efficiency becomes the hidden lever. Upgrading equipment, streamlining processes, and using better data to manage inventory, pricing, and forecasting can protect margins even in flat markets. This is often the least glamorous strategy, but historically one of the most effective.

Demographics may be destiny in the long run, but strategy still matters in the meantime. Whether you’re pouring wine, producing widgets, or planning the next five years of your business, diversification isn’t about abandoning what made you successful. It’s about making sure you’re still standing when the population math changes.

And if all else fails, there’s always one more bottle to open before dessert.

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Do you remember those mornings before school when you’d flip on MTV, hoping to catch the latest music video before the bus arrived? A few minutes of guitar riffs or pop hooks, your backpack half-zipped by the door, and suddenly it was a mad dash to make it on time. MTV didn’t just shape the music scene, it changed how we consumed entertainment. Yet its hesitation to adapt when the world shifted offers a lesson that reaches far beyond pop culture. It’s a reminder of what happens when timing and adaptation collide, a theme that feels especially relevant in today’s economy.

As 2025 winds down, our forecasts have not only proven accurate but actionable. On October 24th, the latest Consumer Price Index (CPI) data showed further upside pressure on prices. One year ago, we forecasted annual CPI to hit 2.67% by September 2025; and the actual number came in at 2.7%. This meant that our claim that by mid-2025, inflation will bottom out and was poised to rise again, appears to have turned into reality. Considering this prediction predated elections, trade talks, and numerous headlines, it highlights the value of forward-looking analysis. Below shows our Active Forecast that has remained unchanged since its inception in 2024 data. The results are squarely within our forecasted range.

In prior commentary, we flagged the Fed’s delayed decision to lower interest rates, noting that such delays could impact consumers. While we can only forecast known variables, the Fed’s slow pivot in 2025 seems to have slowed the labor market. This isn’t signaling a recession, but it does raise a question: did the Fed’s late action curb inflation at all, or did it simply weigh on employment unnecessarily? Much like MTV failing to capitalize on emerging media platforms, the Fed’s “wait and see” approach may have simply led to an inevitable outcome: rising inflation but with a weakened consumer.

The logic behind keeping rates elevated was to apply downward pressure on prices. Yet structural forces such as demographics, supply chain shifts, and persistent wage growth have outweighed the Fed’s tools. Inflation not only stayed above target but has entered a cyclical upswing, suggesting higher inflation ahead. Could monetary policy have been loosened earlier to protect the labor market, knowing that inflation was likely to rise again? This isn’t a critique of the Fed. Over time, monetary policy has helped smooth aspects of the business cycle. Gone are the days when the only clue we had about policy decisions was whether the Fed chair left the room with a thick briefcase (signaling a rate cut) or a thin one (signaling no change).

Looking ahead, markets anticipate the Fed will eventually ease rates. But longer-term fundamentals suggest inflation will remain elevated over the next few years, limiting the Fed’s room to maneuver. In other words, the window to act may have passed, something MTV, too, might have wished it had recognized years ago. The consequence? Higher borrowing costs for both businesses and consumers, alongside slower momentum in the labor market.

Raise your hand if you’ve learned some history just by looking at an old photo on social media then looked into it further and are shocked by the results.

Maybe it’s a slideshow of fashion through the decades. Or a photo of the original Michelin Guide that sends you spiraling into the realization that Michelin Stars are somehow connected to the big white marshmallow-looking tire guy. (Yep, that Michelin.)

Well, a few weeks ago, one of our writers went out to grab dinner. Instead of cooking, they picked up a rotisserie chicken, tossed it on some lettuce, and boom, instant bowl. Because, let’s be honest, everything is a “bowl” now.

Later that night, as if their phone had been eavesdropping (creepy!), they saw an old ad from the 1960s pop up: Publix Supermarkets, a Southern grocery chain, was selling rotisserie chicken for $1.39. Naturally, in classic economics-nerd fashion, one of us immediately argued that if chicken prices had tracked with inflation, that same bird would cost closer to $15 today.

Fast forward to the next day, while we were killing time at the airport. The chicken chat escalated into a full-on discussion about products that have held steady in price over the years. Shoutout to Arizona Tea $1 can and Costco, which has kept its rotisserie chicken at $4.99 since 2009. (Apologies to anyone standing near us before boarding, we probably got a little too excited about poultry pricing.)

But here’s the point: while some products have held their ground, others have skyrocketed. If you go back to the early 1980s, transportation costs, third-largest in the consumer spending basket, have increased around 161%. Food, the second-largest category, has climbed too. But it’s Shelter that takes the crown, rising a whopping 285% over four decades.

Even more eye-opening? According to the Bureau of Labor Statistics, Shelter made up just 27.8% of the Consumer Price Index (CPI) in 1984. Today, it’s 36.2%. That means we’re spending a much bigger slice of our spending habits on housing than we used to. And that’s what led us to a bigger question while sipping airport coffee:

If the government data shows housing is eating up more of our spending, should we rethink the old rule about how much of our paycheck should go toward a house payment?

Let’s go back to a previous blog post where we dug into housing affordability. We shared a map of the U.S. showing whether the average household income in each state was enough to afford the average home there. We’ve since updated the data, and even with rising incomes, slightly cooler home prices, and a small drop in mortgage rates, only 8 states have household incomes high enough to afford the average home under traditional guidelines.

Those guidelines, by the way, often assume that housing costs shouldn’t exceed 30% of your income. That rule dates back to 1969 when public housing rent was capped at 25% of income, gradually rising into the 1980s. But is that threshold still reasonable today?

Take a look at the chart below. Historically, the average share of income spent on owning a home with a 30-year mortgage has hovered around 34%. Not far from that 30% benchmark. But if you go further back from 1984 through 1999, it was closer to 36%, which somewhat mirrors the current CPI weighting of Shelter.

Now, you might be thinking, “Okay, but does that extra 6% really make a difference?”

Absolutely.

If we adjusted the affordability metric from 30% to 36% of income, the number of states where the average household could afford a home jumps from 8 to 17. And if we assume a slightly larger down payment to 25% (very possible for folks who’ve been sitting out of the market for a while) that number rises to 25 states.

By our estimates, current housing affordability sits around 38% of median household income. Sure, that’s elevated, but it’s not hopeless either.

This isn’t a one-size-fits-all solution nor is it a recommendation. Everyone’s finances and comfort levels are different. But it’s worth saying: the housing affordability conversation shouldn’t be limited to just interest rates. There are other levers we can pull, especially considering that housing now plays a much bigger role in our spending than it did decades ago.

Shouldn’t that shift how we think about buying a home? And with wage growth expected to stay relatively strong this decade, maybe there’s some breathing room to grow into that house after all.

John Wooden is arguably the greatest college basketball coach of all time. Four undefeated seasons. An 80% win rate. Ten NCAA titles, including seven in a row. The “Wizard of Westwood” set the gold standard for coaching.

And how did he do it? By focusing on the basics.

We’re talking real basics. Legend has it that at the first practice of every season, Coach Wooden would teach new players how to properly put on their socks. Why? Because if you put on your socks with creases and then lace up your shoes, you’re inviting blisters. And blisters lead to missed practices, missed shots, and eventually, missed championships.

We can only imagine Coach Wooden would be proud of anyone reading this who just paused to readjust their socks. The fundamentals matter.

Back to Basics: Labor Supply and Demand

Nothing is more fundamental to economics than the relationship between supply and demand. So after a noisy week in the labor market, we’re getting back to basics; making sure our proverbial socks are on straight and digging into labor supply and demand.

For simplicity purposes we lean on two core measures to understand the fundamentals of the labor market:

• Job openings = measure of labor demand

• Number of unemployed people (who are actively looking for work) = measure of labor supply

Using those data points, we create a Labor Market Index by taking the ratio of labor demand to labor supply. The higher the index, the tighter the labor market.

Our index currently sits above 1, meaning there are more job openings than unemployed people. That suggests excess demand for labor and employers are chasing a limited pool of workers.

Why does that matter?

Because tight labor markets put upward pressure on wages. When there are more workers than jobs (i.e., excess supply), the opposite tends to happen: downward pressure on wages.

Here’s the kicker: our labor market index tends to lead wage growth by about a year.

The trend? Stabilization.

Our forecast calls for wage growth to settle just north of 4% for 2025 and 2026. So if you're working on budgets for next year, this is your friendly reminder: wages are still rising.

If you’re in charge of a budget, a team, or just want to make sure your economic socks are on correctly, here’s what you should be doing now:

1. Revisit Your Wage Assumptions

• Are your projected wage increases keeping pace with what’s happening in the market?

• Our forecast shows wage increases stabilizing just north of 4%, so anything below that could be a red flag. Be sure to stress test your budgets for 2026.

2. Benchmark Your Pay

• Compare your compensation levels to local and industry-specific data.

• Look at total compensation, including benefits and flexibility, not just base wages.

3. Focus on Labor Retention

• It’s often cheaper to retain a good employee than to recruit a new one in a tight labor market.

• Small gestures—like growth opportunities, flexible schedules, and recognition—go a long way.

4. Plan for a Slower Hiring Timeline

• With more openings than available workers, hiring may take longer. Be sure you have your staffing needs in place before your next busy season

• Build extra time into your workforce planning and project staffing strategies.

5. Keep Communicating with Your Team

• Let employees know you’re tracking wage trends and working to stay competitive.

• Transparency builds trust and trust builds loyalty.

Final Thought: The Fundamentals Still Win Championships

Just like Wooden focused on socks, we focus on supply and demand.
Your organization’s fundamentals aren’t just products or service, they’re your people.

Whether you’re leading a company, managing a department, or just trying to make smart decisions—start with the basics. Make sure your socks are smooth, your outlook is grounded, and your people are supported.

The fundamentals matter. Always.

We often find ourselves diving into research rabbit holes. Sometimes we even catch the rabbit. Other times, we have to abandon the endless Excel charts before someone misses dinner.

Recently, one of those rabbit holes involved trying to understand whether mortgage risk premiums were having an impact on the broader economy. While we didn’t find much in the way of forward-looking guidance, we did start to wonder: why are mortgage rates currently so much higher than bond yields or even the interest rates set by the Federal Reserve, especially compared to historical norms?

We’ll admit, some of this curiosity may have been fueled by personal frustration. Both of us are trying to buy and sell property right now, which probably makes us a little extra sensitive to the topic.

That brings us to a common question we often hear from clients and audience members: Why haven’t mortgage rates come down more if the Fed cut rates last year or if bond yields have improved?

So what’s going on?

Mortgage Rates Don’t Follow the Fed Directly

The Federal Reserve controls short-term interest rates, but mortgage rates are influenced more by the bond market; specifically, the yield on the 10-year U.S. Treasury note. That’s because mortgages are long-term loans, and the 10-year Treasury reflects broader market expectations about the economy, inflation, and interest rates over time.

So even when the Fed lowers the federal funds rate, something they haven’t done since January 2025, that doesn’t guarantee a drop in mortgage rates. In fact, we’ve seen mortgage rates remain a bit more elevated than in the past. Treasury yields may move differently, and that disconnect helps explain why mortgage rates haven’t fallen as fast as some people expected. Even a more recent downgrade in the US’ credit rating would partially support higher yields for government borrowing and thus mortgage borrowing too.

The Yield Curve Tells a Story

Here’s where it gets more interesting. One of the biggest market signals that influences mortgage rates is something called the yield curve. Normally, longer-term bonds offer higher yields than short-term ones. That makes sense because lending money for 10 years should carry more risk and therefore more reward than lending for 3 months.

But sometimes the curve inverts, meaning short-term yields are higher than long-term ones. That’s exactly what happened in late 2022. This often signals that investors expect a slowdown or even a recession, which would likely push interest rates lower in the future.

So how does this connect to mortgage rates?

When Homeowners Expect Rates to Fall, Banks Get Nervous

If you're a homeowner and you think rates will fall, you’re more likely to refinance when they do. This shortens the expected life of your loan, which makes it less profitable for the bank that issued it.

Lenders don’t like short-term relationships. To manage that risk, they charge a higher mortgage premium, essentially padding the rate to protect against early payoffs. That’s part of why mortgage rates haven’t come down even as Treasury yields have.

This isn’t just speculation. Research from the Federal Reserve Bank of Richmond shows a strong connection between the yield curve and mortgage premiums. When the yield curve inverts, and refinancing becomes more likely, lenders respond by increasing the spread between mortgage rates and Treasury yields.

The Numbers Back It Up

Historically, the spread between the 30-year mortgage rate and the 10-year Treasury yield averages around 1.8 percentage points, meaning mortgage rates are 1.7 percentage points higher than bond yields. In 2022, that spread peaked above 3 percent, something the U.S. hadn’t seen since the late 1980s. Through May 2025, the spread has narrowed but still sits around 2.5 percentage points; well above historical norms.

So if the 10-year Treasury yield is at 4 percent, it’s reasonable to see mortgage rates still floating above 6 percent. That gap reflects market uncertainty and the expectation that borrowers may refinance sooner than later. The following illustrates the relationship between mortgage premiums (measured as the 30-year mortgage rate minus the 10-year Treasury yield) and the bond yield curve (measured as the 10-year minus the 3-month Treasury yield).

On the home buying front, we’ve been watching the bond market closely; especially the 10-year Treasury yield since it continues to play a key role in where mortgage rates are landing. So far, mortgage rates have remained relatively sticky, with spreads that are still wider than usual. Recently, we’ve seen more lenders introducing options to help ease the pressure of higher rates, including temporary buydowns and reduced closing costs, which can improve affordability in the short term.

On the home selling side, affordability continues to be a key factor. While there’s been some improvement thanks to rising wages and a slight softening in home prices, mortgage rates remain a major component of the challenge. It’s something we’re factoring into our own decisions and watching closely.

We’re also seeing these higher borrowing costs impact corporate financing. Even with signs that rates could eventually come down, many companies appear to be holding back, possibly waiting for more favorable conditions. While commercial financing activity has picked up in some areas, there's a risk that delayed decision-making could stall potential growth. From a broader economic standpoint, that hesitation could contribute to slower momentum as we head into 2026. This is another trend we're keeping an eye on and if this changes our view of future economic growth then stay tuned to hear our thoughts!

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A couple of weeks ago, we had the pleasure of speaking with a group of Florida planners. Naturally, we kicked things off with the usual suspects; some awkward icebreaker photos to distract from thoughts of the post-seminar happy hour, followed by the greatest hits of economic anxiety: tariffs, inflation, and supply chain woes... you know, all the morning readings you skim in your Monday morning news roundup.

But then, during the Q&A (our favorite part, where we settle who answers first with a high-stakes game of rock-paper-scissors) something magical happened.

Two brave souls immediately raised their hands; not to ask about tariffs or interest rates or the price of plywood per square foot, but to talk about something that was more near and dear to their heart: school demand. Or, more accurately, the uncertainty of it. They wanted to know how shifting population trends might affect their local education systems. Should they be planning for new classrooms? Or is it time to hit pause and just give the old buildings a facelift and a fresh coat of paint?

Because when the 5-to-24-year-old crowd starts shrinking, it’s not just bad haircuts and prom dates that disappear, it’s actual student headcount. And the impact doesn’t stop at schools. Think housing demand. Long-term employment pipelines. Youth-focused industries. It all connects.

Let’s look at this chart of annual U.S. births. After a low point in the early 1970s (post-baby boom), we saw a rebound that peaked in the early '90s. Even the dip by 1997 didn’t seem alarming, especially since births climbed again until 2007.

But here’s the catch: since 2007, the trend hasn’t bounced back. Births have continued to decline, dipping below even late-‘90s levels and getting eerily close to those 1970s lows. That’s a red flag for any sector focused on the younger generation—including education. (Retailers too—though if you’re Old Navy, you’re probably doing just fine. We’re slightly ashamed to admit our personal closets might be singlehandedly propping up their revenue, thanks to owning five identical pairs of chinos—one for each day of the week.)

So, what does this mean for school planning?

If you use birth trends as a rough guide for future kindergarten enrollment, just shift those birth numbers five years forward. That decline? It’s already hitting student enrollment and the next five years look even bleaker. And that’s just the start, because these trends move straight up the educational pipeline. College freshman enrollment in 2025–2026 will likely feel a drop similar to what kindergartens saw in 2013 (the front edge of a decline that’s been unfolding for more than a decade).

Different school levels will feel the impact on different timelines, but the overall direction is clear: fewer kids, fewer students.

Of course, immigration plays a big role here too. But to keep things simple (and given where policy has been heading), we’ve left it out of this round.

The enrollment declines we’re seeing today aren’t new. We saw a similar drop after the 1970s birth rate decline, which led to lower school enrollment in the 1980s and tough choices around staffing and facilities. A birth rebound in the 80s into early 90s driven by millennials, helped reverse some of those trends. But this time is different: no rebound is expected. While K–12 enrollment impacts are clear, colleges face an added challenge: a long-term shift away from the four-year degree as the default path. With rising demand in trades and signs of degree oversupply in some white-collar fields, educators and planners must prepare for smaller student populations and more diverse pathways.

So, what can planners do?

Take a page from the business world: when the pie isn’t growing, it’s all about gaining share. That starts with understanding what families want from their schools. How are local migration patterns shifting? Is your district gaining residents or losing them? If the trends aren’t in your favor, it may be time to revisit those big capital plans and rows of shiny new desks.

If solution-building hasn’t already started, now’s the time. Begin by rightsizing facilities based on the next five years; not the last five. That often means repurposing space and prioritizing flexible, multi-use designs. Diversify educational pathways to align with regional workforce needs by partnering with local employers and reframing success beyond the traditional four-year degree. To grow your share, attract and retain families by focusing on what they truly value. Use surveys, participation data, and targeted outreach; both in-district and beyond, to guide decisions. And finally, make scenario planning central to your strategy. Equip yourself with the right tools to prepare for what could happen, not just what has happened.

Whether you're forecasting water demand, tax revenues, or school enrollment, the same principle applies: plan ahead and adapt early. We don’t have a magic wand to reverse generational shifts, but we can help you stay one step ahead of them.

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If you checked Yahoo Finance this morning, you might’ve been bombarded with a whirlwind of takes: a contraction in U.S. GDP, cautious optimism around China’s tariffs, and job data that missed expectations. So, is the economy in trouble or not?

See below for today’s morning coffee confusion moment:

The U.S. economy, measured by real GDP (Gross Domestic Product), shrank by 0.3% in the first quarter of 2025. That’s the first dip since early 2022, and for a lot of folks, that alone might trigger recession alarms.

But here’s the catch: GDP isn’t always the best "fit check" for the economy.

Think of it like taking your blood pressure. It’s a decent start to understanding your health but clearly not the best you can do.

Let’s rewind to 2022. Back then, GDP also dipped in Q1—by even more than this time—and yet we didn’t end up in a recession. In fact, the U.S. economy went on to hit record highs. So a single negative quarter? Not a doomsday sign.

Back in March, the Atlanta Fed’s internal model predicted a much worse result—around -3%—largely because of anticipated tariff impacts. A lot of companies and consumers rushed to buy overseas goods before those tariffs hit, which, funnily enough, hurt the GDP number. That’s because GDP gets dinged when we import more than we export, even though all that buying activity can signal strong demand.

So, the -0.3% figure we got today is a far cry from the panic predictions a few months ago.

Despite the headline contraction, a lot of the GDP’s inner workings were actually in good shape. So now we can move off the blood pressure exam and into more of a full physical.

• Business investment rose by 1.29% compared to the last quarter. That’s stronger than it was a year ago and shows that companies are still investing for the future.

• Consumer spending, both on goods and services, stayed positive. Sure, it wasn’t as robust as last year, but we’ve long expected some cooling in early 2025. The fact that spending is still rising is a good sign.

• Federal government spending was also negative which can hurt GDP but some financial balancing could help a little towards deficit spending which can keep inflation even more sticky- something the Federal Reserve is keeping in mind as they keep interest rates elevated and another reason why the summer meeting will be an important one to focus on.

So while GDP is the big flashy number everyone talks about, there are aspects of the measure that show more favorable economic conditions. It’s like your team losing a game, but your star players still putting up solid numbers. Of course, it will be important to make sure those star players are still physically fit by the 4^th round but so far we see a strong 1^st quarter.

As we think about the future, the second quarter could still be bumpy. April might bring another dip in GDP next quarter if import activity remains high. But there’s a silver lining: if tensions around tariffs ease or go away entirely, that could boost the numbers going forward.

At the end of the day, the consumer, the heartbeat of the U.S. economy, still looks relatively healthy. And while things aren’t perfect, there’s more optimism in today’s data than fear.

A mid-May day in Hyderabad, India just hits differently. As Floridians, we're no strangers to a “feels like” temperature north of 100°F. But nothing—and we mean nothing—could’ve prepared us for a heat index nearing 120°F, where each drop of sweat evaporates before it even has the chance to roll down your face. It’s the kind of heat where you seriously consider gambling with the local tap water just to avoid dehydration.

But the mangoes that time of year? Totally worth every drop of heat exhaustion.

Needless to say, this was not the time—or place—for wandering the streets with purpose but without direction. And yet, that’s exactly where we found ourselves in May of 2019.

We were in town for one of the most fun, exhausting, exhilarating, taxing, and absolutely unforgettable weddings we’ve ever attended. A wedding so intense, at least six different uncles assured us the entire point was to make sure the bride and groom never ever want to do it again. Peak ceremonial endurance.

We were told ahead of time that we’d need specific outfits for each ceremony (yes, plural), and we were even given a list of U.S. stores where we could buy everything. Smart, right? All the info. All the data. Strategic planning at its finest.

But… where’s the fun in that?

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In our infinite wisdom, we decided it would be far more authentic—and, let’s be honest, cooler—to buy our wedding outfits locally once we got to India. And so we did. Kurtas, saris, lehengas, vest-and-pajama combos—all sourced from local malls, shops, and stitched up by neighborhood seamstresses. The right way to do it, we told ourselves.

Well… almost.

We forgot one thing: Mojaris. The traditional shoes that tie the whole look together.

So, the day before the wedding (because obviously), we hit the streets on a mission: find Mojaris, buy Mojaris, become wedding-ready legends. Except… where do you even begin?

We stepped out of the hotel. Looked right. Looked left. Then did what any overconfident tourist does—we followed the noise. After all, noise means activity, right?

Wrong.

We passed shop after shop, our clothes growing heavier with sweat by the second. Eventually, we reached a chaotic intersection—no traffic lights, no signs, just a swirling mass of cars, motorbikes, and sheer chaos. A kind local noticed our overwhelmed postures and motioned, “Follow me,” then casually strolled into the traffic like he was parting the sea. Naturally, we followed.

We wandered into what looked like a promising market district… until we realized we were deep in the land of steel vendors. Great for welding. Not so great for shoes. Two hours in, drenched and defeated, we retraced our steps all the way back to where we started.

Time to ditch the vibes and use technology—aka, GPS.

Only problem? We had no idea what a Mojari shop looked like or what it might be called. Searching the GPS for “Mojaris” was not helpful. So we blindly followed the map to a mishmash of shops visible on our phone screens selling everything from cell phone chargers to tennis shoes. But still, no Mojaris.

Eventually—miraculously—we found a shop with the elusive shoes! Victory! Kind of…

Their largest size was a U.S. men’s 10. We wear 12s.

Tired, hungry, and on the verge of tears—if we had any moisture left in our bodies—we sucked it up, shelled out more money than expected, and walked away with shoes that barely fit and pride that definitely didn’t.

So what’s the moral of this overheated odyssey?

When you need a definitive solution: Begin with a well-researched plan. Talk it through thoroughly. Challenge the plan—look for flaws, and question assumptions. Then, build in contingencies to prepare for as many uncertainties as possible.

And that brings us to today.

As we map out our future expectations—especially around inflation—we’re reminded of this very sweaty lesson. Back in September 2024, we put together our inflation, production, and wage forecasts based on solid data. Since then? A presidential election, new tariffs, and global trade debates have added a lot of noise.

And just like in Hyderabad, it’s tempting to chase that noise. Thoughts of altering course without reviewing the original plan. Or being swayed by a noisy friend or even client who saw multiple news updates on their phone that probably countered one another.

But the best planning comes from what’s known—not from whatever’s trending. All of these topics were considered in our research and trust us; we poked as many holes into our forecasts as possible. In September, we knew reshoring and economic nationalism were decade-long trends. The chart below shows that while total trade (exports + imports) continues to grow, its share of GDP has been declining since 2012.

These patterns coupled with tight labor markets, structural deficit spending and our anticipation for growth in industrial production, all place upwards pressure on inflation. So, while tariffs pose an upside risk to our forecast, we are currently not revising. We will not be chasing the news and headlines, and noise. We will use good solid planning tenets, leaning on real data to form our expectations. Over the last few weeks tariff discussions have been altered, suspended, postponed, etc. We remain vigilant about the ever-changing policies, but we will also be responsive only if the data supports a change.

Those long-term trends we mentioned were true in September of last year, and still true today and that forecast of Consumer Price Index through March remains extremely accurate when looking at our quarterly average expectations for 2025 and what we have seen thus far. We have been talking about disinflation into mid-2025 and that has so far been true. We still expect a reintroduction of inflation as we traverse through the second half of 2025. Tariff uncertainty only supports that claim.

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You might be wondering, why are economists talking about date night? Especially when we think an egg is a high-priced, valuable gift any date would be lucky to receive. Well maybe this is our chance to see if we should stick to economics or try our hand at love advice (in which case please let us know what we should name our YouTube channel). And while eggs might not be the key to romance, they do play a role in the discussion about inflation in the news. So, let’s pivot to the classic "chicken or the egg" dilemma—this time, in the context of inflation, expectations, and the Federal Reserve.

Yesterday was the second Federal Open Market Committee meeting in 2025 and this one comes with their projections on inflation, the economy, and other measures. Beyond some negative attitudes towards short-term volatility in the economy driven by tariff discussions, one other thing that stood out was the chairman’s concerns about managing inflation expectations. When the Federal Reserve discusses inflation expectations, markets often treat it as a signal of what’s to come. Historically, businesses anticipating higher inflation have raised prices preemptively, creating a self-fulfilling cycle. But what if inflation expectations don’t directly drive inflation? Instead, they might simply reflect current inflation results. But something we do see is the ability for expectations to influence the Fed’s tone—ultimately influencing inflation down the line.

A Brief History: The Volcker Era

In the 1980s, during Paul Volcker’s time as Fed Chairman, the U.S. was battling high inflation and stagflation. Volcker raised interest rates sharply to control it which signaled to business and consumers that inflation will be handled and come back to more manageable levels. The lesson for future policy makers? Managing inflation expectations could help stabilize inflation and even labor markets. However, while the Fed still monitors expectations, the link to actual inflation isn’t so direct. Just because people expect higher prices doesn’t mean they’ll rise or fall immediately—or as much as expected. The real effect comes from the fundamentals of supply and demand coupled with the Fed’s response to these structural components, which takes time to show up in the economy.

Future Expectations Tend to be Shaped More by the Past Than by What’s to Come

Think of inflation expectations like planning a date night. One person might set high expectations for a great evening to set the mood for what’s to come, but success depends on other factors—like whether the planner has enough money (demand) or if the restaurant has available seating and specials for you and your date (supply). Coming from a bunch of economists who have a hard time planning the special event, trust us that these things matter. We will also say that talking about economics during a nice dinner may also decrease the likelihood of a successful date night so a word of caution.

In the same way, inflation expectations may influence the Fed’s actions, there’s a bit of a blurred causality that says it causes inflation to move up or down. The Fed may raise interest rates in response to expectations, but those changes take time to affect prices. By then, factors like supply chain issues or commodity price hikes may have a bigger impact on inflation in the near term and have more affect than just inflation expectations, especially when many prices are globally driven. If inflation expectations were a larger driver, then we would see a stronger lead time relationship between inflation expectations and inflation. The chart below illustrates that the relationship is more coincidental.

The Fed is slow to react to changes in inflation expectations. It takes time to analyze data – especially with the frequent and significant revisions we've seen in employment figures lately. Implementing changes, like interest rate hikes, adds another layer of delay. In the last few Fed meetings, we are constantly reminded of their need to wait and see. Even after the Fed acts, it can take months or years for those changes to affect inflation. For example, if inflation expectations rise due to a tariff discussion, the Fed may raise rates (although as of now they are not signaling this)—but that won’t immediately lower inflation. Meanwhile, inflation could still rise due to factors like a strong consumer or supply chain disruptions the Fed didn’t anticipate, and their reactions wouldn’t likely cause an immediate impact.

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We’ve been saying for some time that inflation will likely continue through disinflation (slowing inflation) before re-entering expansion (rising inflation) again by the middle to late 2025. These expectations have been in place much longer than the recent tariff talks or fluctuations in inflation expectations the Fed is mentioning. While the Fed responses are catching up to our longer-term view, the measures we find more useful for forward-looking guidance are more structural things like, supply chain trends, commodity prices, labor market dynamics, consumer behavior, and many others.

These are the factors that give businesses a clearer, real-time picture of inflationary pressures, and they’re much more actionable than simply focusing on inflation expectations which appear to move with inflation rather than providing forward looking guidance.

Why This Matters for Businesses and Communities

The takeaway: Don’t lay an egg with your planning—we couldn’t resist one more egg pun. Businesses and community planners shouldn’t place too much weight on the Fed’s talk about inflation expectations. These expectations don’t directly lead to inflation—they absolutely can be a tool to justify Fed’s actions, which again, take time to have an effect. By focusing on supply and demand fundamentals – i.e. structural factors like supply chains, commodity prices, and consumer behavior—businesses and community planners can make more informed decisions and better prepare for inflation.

Just like a date night’s success depends on more than managing expectations, inflation is influenced by many factors. The Fed’s response to inflation expectations is only one piece of the puzzle—and the policies that have been implemented last year might still be impacting today’s results. Focus on the things that matter; a well thought out dinner reservation at the location your significant other has been sending Instagram links to for over a year would likely be a good start.

Where is affordability?

Let’s start by looking at housing affordability by state. When you compare median household income to the cost of a median-priced home, the picture isn’t great. In fact, only 9 states currently have incomes that can support the price of an average home. To make it clearer, think of the map below where green states represent areas where people can afford homes, and red states represent those where they can’t.

One of the main culprits here is the sharp rise in mortgage rates over the past few years. On top of that, home prices surged during the pandemic, fueled by high demand. But let’s entertain the idea for a moment: what if mortgage rates dropped? For example, if they fell from the current 6.87% to 5%, we’d see a slight improvement, with a few more states (mostly in the Midwest) making the “affordable” list. But here’s the kicker: we’re not expecting a dramatic drop anytime soon, given the Federal Reserve’s recent stance on interest rates. So, don’t hold your breath for an interest rate miracle in 2025.

What should you be planning for as a home buyer?

If you’re holding out for those low mortgage rates, it might be time to rethink your strategy. One thing we haven’t mentioned yet is that wages are rising, and home prices are cooling off. Since their peak in late 2022, US Median Sales Price of Houses Sold, have dropped about 12.5%. So, if wages were to increase by 5% this year and home prices stayed the same, that would make homes more affordable in a few additional states. Unfortunately, we expect annual US Median Earnings to trend closer to 4-4.5% growth in 2025 so although growth in wages will help, it’s by no means the silver bullet.

The takeaway? Don’t bank on timing the interest rate market perfectly. Instead, maybe it’s more about focusing on the long-term financial benefits of owning a home over renting. While we could write an entire blog on the long-term advantages of homeownership, there are some important benefits. One key benefit is the equity you build over time. Given the significant scar tissue left by the Housing Bubble, there's concern that prices could collapse and remain negative for years. But that period of time may not reflect the normal performance of the housing market. Fortunately, homeowners have seen positive equity gains about 90% of the time since 1953, with the Great Recession accounting for much of the equity loss observed.

Another benefit is the ability to stabilize your yearly costs. For example, over the last 10 years, a person’s monthly costs would have increased by more than 15.8% when comparing the 12-month moving average for Rent of Primary Residence with the equivalent measure for Owners' Equivalent Rent. With the latter referring to the monthly expenses of owning a property (such as mortgage, taxes, insurance, etc.) expressed as the amount of rent that would be equivalent to those ownership costs. This is a long way of saying that over the long run inflation can be more impactful for those who rent vs own.

So, after hours of driving, bouncing between data points, and venturing down countless rabbit holes, we realized something important: the housing market isn’t going to fix itself anytime soon. But by understanding the landscape—whether it’s waiting for mortgage rates to drop or figuring out how to make homeownership work with rising incomes—it becomes clearer that the real question isn’t if you can afford a house, but when and how you’re going to take that leap. The road to homeownership may not be straight, but it’s one we find worth traveling.

Disclaimer:
The information provided in this blog post is for informational and entertainment purposes only. It reflects the writers’ personal opinions and experiences regarding the topic of buying a house. It is not intended as professional financial, legal, or real estate advice. Please consult with a licensed financial advisor, real estate agent, or other qualified professional before making any decisions related to purchasing a property or other financial matters. We do not accept any liability for actions taken based on the information provided here.