The ongoing government shutdown has helped push confidence to near-record lows, but one segment of the population is actually feeling more optimistic.
The initial reading for the University of Michigan’s sentiment index fell to 50.3 in November from 53.6 last month, almost matching the all-time low of 50 from June 2022, when the annual rate of inflation hit its post-pandemic high.
The decline was widespread and was seen across different age groups, income brackets, and political affiliations, she added.
But not everyone followed that trend.
“One key exception: consumers with the largest tercile of stock holdings posted a notable 11% increase in sentiment, supported by continued strength in stock markets,” Hsu said.
The survey closed before Tuesday’s elections, which revealed continued voter discontent about affordability as food and energy prices creep higher.
That came as investors grew more concerned about the AI boom looking like a bubble that could pop soon. Until this past week, the stock market was on a hot streak, notching fresh record high after record high, with the S&P 500 even closing in on the 7,000 milestone.
The market’s impact on consumer sentiment comes as stock ownership has broadened over past five years into more income and age groups.
Stock ownership has highlighted a divergence in consumer sentiment in recent months: investors are turning more upbeat while non-investors have turned more pessimistic, according to University of Michigan data from October. And participants with the top 20% of stock holdings are especially optimistic.
The spilt even mirrors the K-shaped economy that has emerged as higher-income Americans continue to spend and prop up overall consumption, while others have pulled back.
Today, a $1 increase in stock wealth leads to a $0.05 marginal propensity to consume, up from less than $0.02 in 2010, according to Oxford Economics.
The University of Michigan pointed out in October that sentiment among stock market participants had been on the rise since May—after tumbling in April when President Donald Trump shocked global markets with his “Liberation Day” tariffs.
By contrast, sentiment for non-stockholders continued to decline and had already hit post-pandemic lows.
“These patterns are consistent with the fact that strong asset values support consumer sentiment
only for those who own those assets,” the report said. “Meanwhile, given that wealthier, higher-income consumers generate a disproportionate share of aggregate spending, the recent uptick in sentiment among these households may may help buoy consumption spending even amid views of the economy that are relatively subdued from a historical perspective.”
