Is Your Hamburger Getting Cheaper? See How the Stock Market Affects Food Costs

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American consumers have been hit hard by rising costs of groceries and restaurant meals in the past few years. But during 2024, price inflation has come down significantly. And there is one unexpected reason why beef could be getting cheaper -- the price of stock investments.

In early August, the stock market went through a downturn. There was even a mini stock market crash on Aug. 5, 2024, when the S&P 500 lost 3% of its value in one day. But when stock prices go down, there is one silver lining: sometimes, beef prices go down too. For example, as of Aug. 23, 2024, live cattle prices are down about 3.39% since a late July high.

Let's look at the connection between beef prices and the stock market, and why cheaper stocks can also mean cheaper beef.

Stocks and steaks: How the stock market affects beef prices

According to Bloomberg, sales of steaks tend to go up when stock markets rise. There are a few possible reasons for why higher stock prices and higher beef prices tend to go together.

Overall economic growth

The stock market is about the future. Stock prices tend to be a forward-looking indicator, meaning that if stock prices go up, people believe that the economy is going to be better (and companies more profitable) in the near future.

But if there is some bad economic news, volatility, crisis, or worries about a possible recession or economic downturn, the stock market will typically go down, as investors no longer want to pay such a high price to own a share of future corporate profits.

When the economy gets better, more people can afford to splurge on a nice steak. Steak prices are not just about Wall Street teams celebrating a big deal at a local steakhouse. The price of beef is also a sign of overall economic health. When Americans feel securely employed and optimistic about the future, they might buy more beef.

Wealth effect

Economists have observed a trend called the "wealth effect," where if people's stock portfolios or other financial assets go up in price, people tend to spend more money.

Having stocks in your brokerage account is not the same as receiving a big pay raise at work. Wealth is not income; your stock portfolio's value can go up or down at any time, while (hopefully) your income keeps arriving on every payday.

But if you own a home and house prices have gone up, if you own stocks and the S&P 500 is having a good year, if your IRA is feeling flush, this can make people feel more confident to take out their credit cards -- and not just to buy steaks.

"Trading up" to higher-priced food

Every day, at every meal, people have choices about what kind of food to eat and what they're willing to pay for. If you're in a higher-income household, you might have just kept buying steaks and ordering hamburgers throughout the recent times of high inflation, without worrying too much about the price of beef. But many lower-income consumers are more price sensitive.

When the economy gets better and people have higher take-home pay, they're more likely to "trade up" to choose higher-priced food like steak. When the economy is uncertain and people are feeling worried about job security and pressured by high inflation, they are more likely to "trade down" to lower-cost proteins like chicken, pork, or beans.

How to buy stocks based on prices of beef

Does this mean you should try to time the stock market, or pick stocks, based on beef prices? No! Timing the market and day trading can be risky, and are less likely to succeed in the long term than just buying and holding a diversified portfolio of low-cost index fund ETFs. Unless you're a cattle industry expert, you're not likely to be able to forecast the stock market based on prices of beef.

But the connection of steak prices and stock prices is another lesson in why it pays to stay humble, patient, and diversified when investing for retirement. The stock market reacts to an ever-changing swirl of economic news and data. No one loves paying higher costs at the grocery store, and high inflation is bad news for lower-income consumers.

But sometimes, higher prices at the steakhouse can be good news for investors -- because it means lots of American consumers are feeling wealthy and hopeful enough to keep ordering ribeyes, sirloins, T-bones, and New York strips.

Bottom line

Stock values go up and down for complicated reasons, and so do the prices of beef and other food commodities. But if you're noticing cheaper prices of beef at the grocery store or steakhouse, you might also want to check your IRA or brokerage account. Cheaper beef can also be a sign of cheaper stocks.

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