Editor's note: Despite having lots of income to spend overall, many Americans feel financially strained today. And according to Vic Lederman, of our corporate affiliate Chaikin Analytics, inflation isn't the whole reason. In this piece, adapted from the free Chaikin PowerFeed daily e-letter, Vic explains how the pandemic-era stimulus created a sentiment bubble that consumers are still trying to overcome.

My local coffee shop finally gave in...

A little sign near the register said, "We apologize. Due to the price of eggs, we have updated the prices of some of our menu items."

Obviously, we've been hearing about egg prices for a while now. And just like you probably have, I've seen them creep up at the grocery store.

I'll admit that I'm not a particularly price-sensitive buyer. But for millions of Americans, prices matter... a lot.

In fact, many folks check their bank accounts before going to the grocery store. They need to make sure they don't overdraw their accounts.

And, as I'm sure you've noticed, the news spends a lot of time on their plight.

Now, I don't mean to downplay the hardships these folks face. Across the country, millions of consumers are struggling.

But today, let's look at the aggregate numbers around disposable income. As I'll explain, they might surprise you...

Today, we're looking at data from the U.S. Bureau of Economic Analysis ("BEA"). It's one of the many arms of the federal government that help us keep tabs on how America is doing.

And the BEA collects a lot of data.

We'll start by looking at a raw number – disposable personal income.

This is income after taxes. So, it's not "disposable" in the sense that you probably think of it. Instead, it's how much money Americans have to spend in general.

Take a look at this chart of disposable personal income over time...

First, notice that disposable personal income is at all-time highs. Additionally, you can see that the stimulus payments during the COVID-19 pandemic created a major distortion.

But this chart doesn't include something that's darn important...

Inflation.

Fortunately, the BEA provides us with inflation-adjusted data. Take a look...

This time, the chart starts at the end of 1989.

Seen this way, the pandemic distortion becomes even clearer. It's obvious that the payments the government made during that time were huge.

The stimulus boosted Americans' after-tax income dramatically. And you can also see that we're no longer at all-time highs.

Looking at this data, we can see that the effects of inflation are very real. But in my opinion, that spike is the bigger problem...

Remember that many Americans are facing real financial hardship. But in aggregate, disposable income (adjusted for inflation) is still growing.

Unfortunately, for many Americans, it doesn't feel like it. That's especially true for lower-income folks.

Put simply, the stimulus payments during the pandemic created a "sentiment bubble."

For the first time, millions of Americans had extra cash on hand. They went from living paycheck to paycheck... to having some true disposable income.

Despite the growth in so-called "real disposable income," we're still not above the high-water line we hit back then. And that feels terrible.

Combine that with soaring costs of living, and you have a recipe for discontent.

It's going to take time for Americans to break free of the pandemic-era disposable income anchor. And until then, we're going to continue to see widespread economic frustration.

Put simply, sentiment matters.

Good investing,

Vic Lederman

Editor's note: While the Federal Reserve flooded the economy with stimulus in 2020, Chaikin Analytics founder Marc Chaikin was developing a brand-new investing strategy. And this year – with stocks sliding and investors worrying about "the death of the bull market" – Marc is finally ready to unveil it...

It's designed to more than double your entire portfolio – before the next crash strikes. Marc will explain everything you need to know on March 27 at 8 p.m. Eastern time. Learn how to position yourself before it's too late.