I don’t believe Wall Street investors are irrationally exuberant at present, contrary to those that say we are now in a stock market bubble with the record level S&P and DOW indexes.
It’s as easy to be irrationally pessimistic about the future as are many Main Streeters that don’t feel so good about themselves or the US economy.
The indexes are high because corporations show record profits, in part thanks to the $trillions in pandemic aid, but also because of the excessive profit-taking by major retailers that took advantage of the product shortages caused by the COVID pandemic shutdowns, which has been confirmed by the FTC.
Large grocery store chains exploited product shortages during the pandemic by raising prices significantly more than needed to cover their added costs and they continue to reap excessive profits, according to a Federal Trade Commission report.
Much of Main Street, ordinary working adults in the main, have become the opposite, irrationally pessimistic, in my opinion. Surveys such as a recent PEW Research survey I highlighted last week show this is so.
In a poll by PEW Research, “About three-in-ten Americans (28%) currently rate national economic conditions as excellent or good, while a similar share (31%) say they are poor and about four-in-ten (41%) view them as “only fair.”
Why such divergent opinions when we are fully employed and have surging economic growth? The most recent Conference Board’s Consumer Confidence survey helps to explain it.
Right and left wing partisans are now controlling the debate. Middle-income Americans, which are most working Americans, are exhausted and pay little attention to economic data, which is difficult to understand even by economists.
Most consumers remain concerned about high inflation, the contentious budget debate, and partisan bickering of the Presidential election campaign.
“Consumers remained concerned with elevated price levels, which predominated write-in responses, said Dana Peterson, its Chief Economist. “March’s write-in responses showed an uptick in concerns about food and gas prices, but in general complaints about gas prices have been trending downward. Indeed, average 12-month inflation expectations came in at 5.3 percent—barely changed from February’s four-year low of 5.2 percent.”
“Recession fears continued to trend downward both in write-in responses and as measured by consumers’ Perceived Likelihood of a US Recession over the Next 12 Months,” he continued. “Meanwhile, consumers expressed more concern about the US political environment compared to prior months.”
The PEW survey chart above shows the tug-of-war between extreme right and left political factions controlling the debate, while 41% of the Americans surveyed viewed economic conditions as “only fair”.
Why? Most Americans are exhausted and still recovering from the pandemic. There is a divergence between those experiencing irrational exuberance vs. irrational pessimism because most of those polled aren’t as knowledgeable about real economic data and business cycles that are published by the government and private providers. So they must rely on their immediate experience; much of it due to the trauma caused by the COVID pandemic that killed one million Americans.
PEW said, however, expectations for future economic conditions are more positive than they were last spring: Today, roughly a quarter say that they expect economic conditions will be better a year from now (26%) – up from 17% in April 2023.
There is hope, in other words, because of a resurgent US economy, the strongest economy in the world, that they will eventually realize their jobs are safe and secure in such an environment.
Harlan Green © 2024
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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