Non-investors’ bearishness neutralizes investors' bullishness.
The RealClearMarkets/TIPP Economic Optimism Index, a leading gauge of consumer sentiment, dropped 0.7% in April to 43.2. The index has remained in negative territory for 32 consecutive months since September 2021.
Reflecting the recent stock market gains, optimism among investors gained 8.3% from 50.7 in March to 54.9 in April, while it dropped by 8.7% among non-investors, from 40.1 in March to 36.6 in April.
The RCM/TIPP Economic Optimism Index has established a strong track record of foreshadowing the confidence indicators issued later each month by the University of Michigan and The Conference Board. From February 2001 to October 2023, TIPP released this index monthly in collaboration with its former sponsor and media partner, Investor's Business Daily.
RCM/TIPP surveyed 1,432 adults from April 3 to April 5 for the March index. The online survey utilized TIPP's network of panels to obtain the sample.
The index and its components range from 0 to 100. A reading above 50.0 signals optimism and a reading below 50.0 indicates pessimism. 50 is neutral.
The RCM/TIPP Economic Optimism Index has three key components. In April, two of these components declined, while one showed improvement.
- The Six-Month Economic Outlook, which measures how consumers perceive the economy's prospects in the next six months, dropped slightly from 38.9 in March to 38.8 in April, marking a 0.3% decrease. In October 2023, this component posted 28.7, its lowest reading since the index debuted in February 2001.
- The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, declined sharply 5.9% from its previous reading of 53.8 in March to 50.6 this month. In January, the component crossed above the neutral reading of 50.0 and has since remained in positive territory for the fourth month.
- Confidence in Federal Economic Policies, a proprietary RCM/TIPP measure of views on the effectiveness of government economic policies, improved from 37.9 in March to 40.3 this month, reflecting a 6.3% gain.
RCM/TIPP also releases our companion index, known as the RCM/TIPP Financial-Related Stress Index, the only metric to track the financial stress felt by Americans monthly.
The index decreased 0.6 points, or 0.9%, from 65.6 in March to 65.0 in April.
The higher the number, the more stress. Readings above 50 signal increased stress, while those below 50 indicate lower stress, with 50 considered neutral. For context, the last time the index posted below 50.0 was before the onset of the pandemic in February 2020, when it stood at 48.1.
Further, its average since 2010 stands at 59.2. April's reading of 65.0 surpasses this historical average by 9.8%, indicating that Americans are experiencing approximately 10% higher stress levels than usual.
Notably, the index reached its recent peak at 70.5 in October 2023, marking its highest reading since December 2008 (71.0). Since then, it has steadily declined for the better, reaching 65.0 in April.
“As I see declining confidence, my gaze turns to the price of gold. Some will view this as odd, or 19th century, but gold has always been the constant whereby the value of the yellow metal doesn't move, but the currencies in which it's priced do. At present, the dollar is at an all-time low in gold terms, and it's hard not to wonder if the weakness of the currency Americans all earn is beginning to seep into sentiment," said John Tamny, the editor of RealClearMarkets.
"Reflecting the stock market's strong performance in 2024, investor optimism increased in the April survey. The share of respondents who think the U.S. is in a recession remained at 44%, up from 43% in March, while the share who believe the economy is improving rose to 28% from 27% last month," said Raghavan Mayur, president of TechnoMetrica, who directed the survey. "Financial stress eased slightly in April. However, the national debt, ongoing layoffs, food prices, gasoline prices, and unrest in the Middle East, along with associated supply chain issues, threaten the U.S. economy. TechnoMetrica believes that the U.S. will enter an extended period of stagflation in the months ahead.”
Economic Optimism Index Breakdown
This month, only five of the 21 demographic groups we track, including age, gender, race, and education, are in positive territory above 50 on the Economic Optimism Index. In contrast, there were three in March, two in February, and five in January. Six of the 21 groups improved on the index, compared to 10 in March, 10 in February, and 19 in January.
For the Six-Month Economic Outlook component, only two of the 21 groups that RCM/TIPP tracks scored in optimistic territory, compared to one in March, one in February, and four in January. Economic Outlook sentiment improved for 9 of the 21 groups, compared to 10 in March, 11 in February, and 19 in January.
For the Personal Financial component, 11 of the 21 groups that RCM/TIPP tracks were in optimistic territory compared to 16 in March, 18 in February, and 15 in January. Two groups rose in April, 12 in March, six in February, and 18 in January.
For the Federal Policies component, only three of the 21 groups were above 50.0, compared to two in March, one in February, and four in January. Seventeen groups rose vs. six in March, 12 in February, and 17 in January.
About TechnoMetrica/TIPP
TIPP is the polling unit of TechnoMetrica, a nationally renowned survey research and market research firm dedicated to providing clients with expert data-driven analysis to facilitate informed decision-making in their businesses. The TIPP Poll is considered the gold standard survey, having the unique distinction of being the most accurate presidential poll in the past five election cycles. The tippinsights unit provides editorials and commentaries on national and international issues, often appearing on the RealClearPolitics website.
About RealClearMarkets
RealClearMarkets (RCM) is a one-stop shop for market-related news, analysis, and commentary. RealClearMarkets collects and publishes business, finance, and economic content from across the ideological spectrum. Site features include Market Data, Off the Street Blogs, Quotes, Research Reports, Videos, Topics, and Facts & Fallacies.
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