America’s Great Economic Divide
In an election year, plenty of politicians claim the economy is a disaster.
But consumer-sentiment surveys have shown people are actually pretty optimistic these days. And why shouldn’t they be? Sure, the political bluster ahead of the presidential election seems particularly pointed this year. But the fact remains interest rates are low, gas prices are still cheap, home prices are up and wages are finally starting to tick higher. People are loosening the purse strings, too: Consumer spending recently advanced at the fastest pace in nearly seven years.
Politics aside, that all helps explain why the University of Michigan’s next consumer-sentiment reading, expected Friday, should be pretty decent. Economists surveyed by The Wall Street Journal estimate the sentiment index hit 93.5 in June. That would be down a bit from last month’s 94.7 reading, which was the highest in almost a year. But the survey, which questions 500 households about their financial conditions and feelings about the economy, still would be significantly higher than recessionary levels and above average for economic expansions.
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Bullish investors might hope for consumer sentiment to keep improving. In presidential election years since 1980, when sentiment finished the year higher than where it started, the S&P 500 averaged a 12% gain. In years when sentiment fell, stocks rose just 0.2%, on average.
Much can change in the second half of the year, of course. The May jobs report was particularly disappointing. Economic growth is still subpar. Troubles overseas remain a concern.
http://www.wsj.com/articles/consumers-dont-feel-trumps-pessimism-1465497309
