The Market Says One Thing, Americans Say Another — Stock All-Time Highs Come Despite Consumer Sentiment Record Lows
Americans have spoken — and they say the economy has never been worse. That is, if you buy the University of Michigan’s Consumer Sentiment survey data (along with other surveys pointing to a decline in the overall economic vibe).
On Friday, the 74-year-old survey registered its lowest reading ever — surpassing even the record lows booked during the COVID-19 pandemic. So what gives?
Americans read feel the moment: Consumer Sentiment is generally categorized as “soft economic data,” measuring how people feel, not what they do — critics often discredit it as “thermostatic.” There are goofy examples of this, namely when supporters of a political party dramatically shift their outlook after a party wins or loses an election. However, the latest UM data, cutting across income, age, education, and political lines, comes amid a flurry of hard realities for Americans. They’re more worried about the present than they were a year ago, and even more worried about what’s coming.
- A big driver of that anxiety is inflation tied to the Iran War — visible increases in gas prices at the pump and prominent headlines about rising costs are playing a huge role.
- Americans are also grappling with large-scale layoffs in the news — namely from Oracle, Citigroup, and UPS — as Fed Chair Jerome Powell warns that job growth is “near zero.”
Everywhere You Look, You See The K
During the pandemic, headlines about the so-called “K-shaped economy” were everywhere, making use of all sorts of statistics showing how the recovery lifted some while leaving others behind. But perhaps right now is the most dramatic evidence of the K-shaped divergence — even as sentiment hits record lows, stock market indexes are at all-time highs.
- While Americans fret the impacts of the Iran War, markets are priced like it’s done and dusted — a striking disconnect given the global ripple effects still unfolding.
- In the past, many conflated the stock market and the economy — but the growing gap between sentiment and markets is putting that notion to the test.
Where does this go? You would be forgiven for thinking that it looks like Wall Street is cheering despite “bad news” across the economy. Pundits expect that this empty rally to all-time highs will fold, either by the ongoing supply chain disaster or a resumption of the fighting in the Middle East. Maybe the market has gotten delusional, as it tends to from time to time. However, there’s a more insidious possibility: maybe the market simply doesn’t care. And that, honestly, is the part worth worrying about.