U.S. Economic Optimism Hits 15-Month High; Investors Feel Fine, Others Not So Much

The IBD/TIPP Poll finds that investors are more bullish on the outlook for the U.S. economy than noninvestors.

Blog

May 14, 2023 • 3 min read

The new IBD/TIPP poll shows that investors and high-income groups have become more optimistic about the U.S. economic outlook over the last month, while non-investors, low- and moderate-income groups, and others, remain in a deep depression.

In March, the IBD/TIPP U.S. Economic Optimism Index increased 1.8 points from 46.9 to 46.9. The index reached its highest level since 2021. The index, however, remained pessimistic, and below the neutral 50 level for the 19th consecutive month.

In a steady decline from January's 55%, 53% of adult respondents believe the U.S. economic situation is in recession. This figure increased to 61% in October.

Receive our newsletters and more information about our products & service. Privacy Policy and Terms of Service

Investors' U.S. Economic Optimism gauge jumped 4.2 point to a strong 61.3. This is the highest level since August 2021 when the bull was still chugging along. The IBD/TIPP index shows that deep pessimism is still present among non-investors. It rose by a tenth of one point to 36.5.

The gap of 24.8 points between investors and noninvestors in the IBD/TIPP Poll, which dates back to 2001, is a record. The previous record was 20.7 points in February.

IBD/TIPP considers respondents as investors if they say that their household owns mutual funds or stocks worth at least $10,000.

Investors can smile. The S&P 500 may have lost 2% in the month of February, but it is up 5.4% this year and 13.2% since the October 12 bear-market low. There have been several bear-market rallies, and it is not clear whether this one will last. You can get the latest information on the stock market by reading The Big Picture, IBD's daily column published in the afternoon.

Biden's approval rating dips to a new low among this key group

Non-investors, however, see less of a reason to rejoice. The inflation rate is still higher than wage growth. This means that the purchasing power of an average hourly salary continues to decline.

According to the IBD/TIPP poll, 30% of adults believe that their wages have kept up with inflation. This is an increase from 27% who said this in February and 21% back in January. In the meantime, 44% of adults say their wages have not kept pace with inflation. This is down from 52% in January and 48% in February.

The gap between high-income and low-to-moderate-income groups is even greater. The Economic Optimism Index jumped nine points among those who earn at least $75,000. Those earning less than $75,000. remain pessimistic with Economic Optimism Index values below 40.

IBD SwingTrader Alerts You When Stocks Are Nearing Buy Points

The IBD/TIPP Economic Optimism Index consists of three subindices. The index tracks the opinions of Americans on near-term economic and financial prospects, as well as their support for government policies.

In March, the U.S. six-month economic outlook rose 1.9 points from a gloomy 41.6 to a more optimistic 41. 6. This subindex fell to 30.6 in June, the lowest since July 2008 when the U.S. was in recession.

IBD ETF Market Strategy: Time the Market with IBD

The subindex for personal finances rose by 2.4 points, to 55. This was the highest level since September 2001. The IBD/TIPP Economic Optimism Index reading for July was 45.3, the lowest since February 2001. Before inflation, the views of personal finances reached a bullish reading of 59.7.

The support for federal economic policy increased 1.1 points, to 44.2. After a low of 35.3, which was the lowest in eight years, in August 2021 it reached a high of 56.4, following more stimulus checks, and amid President Biden's push for more expansive policy. The Federal Reserve has raised interest rates in an attempt to rein in inflation that stimulus caused.

The IBD/TIPP March Poll is based on online surveys conducted by 1,370 adults between March 1 and 3. The results are accompanied by a credibility range of +/-2.8 points.

Follow Jed Graham @URL on Twitter for economic policy and financial market coverage.