24/7 Wall St. Insights

• McDonald’s Corp. (NYSE: MCD) stock has not recovered since the fast-food giant released its earnings.
• It is caught in the American inflation perception squeeze.
• Also: Dividend legends to hold forever.

McDonald’s Corp. (NYSE: MCD) stock, battered by poor earnings and worries that inflation will keep customers away, has not posted a recovery since it released its earnings. Investors appear ready to sit through what could be months of deep problems. If customer perception of its food prices does not change, the wait could be longer.

Over the past year, McDonald’s share price is down 7% while the S&P 500 is up 22%, even after a broad market sell-off that started a month ago. The market has started to recover. McDonald’s has not.

Quartz has pointed out that the average price of McDonald’s menu items has doubled in the past decade. “Nevertheless, a study conducted by data firm FinanceBuzz concluded that McDonald’s has indeed raised its menu prices by an average of 100% over the last 10 years,” the business news website reports.

According to the consumer price index, inflation has dropped from over 8% two years ago to 3% recently. Yet, Americans still worry about rising costs. A new Pew poll reveals that 62% of Americans view inflation as “America’s greatest challenge.” “The public again sees inflation as one of the top problems facing the nation, with 62% saying inflation is a very big problem for the country – only slightly down from the 65% who said this last year,” Pew reports. This puts it above the cost of health care, drug addiction, and the federal budget deficit.

As is the case with what the Pew data show, even with inflation falling, Americans don’t “feel” it.

McDonald’s is caught in the American inflation perception squeeze. Even with $5 meals, which would seem a deal, consumers have not returned.

This Fast-Food Chain Has the Absolute Lowest Customer Satisfaction Score

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