Optimism of large investors despite subdued consumer sentiment

The current economic sentiment in the USA presents a mixed picture: while the majority of the population looks towards the future more pessimistically due to labor market concerns and persistent inflation, investors with large stock portfolios remain remarkably calm. The University of Michigan's Consumer Sentiment Index shows a decline of about 5% in September compared to August, indicating broader economic concerns. However, those respondents with extensive stock portfolios appeared unimpressed by the general uncertainty. In recent weeks, the major US stock indices have registered a series of record highs, which should please investors with significant stock holdings. Jim Baird, Chief Investment Officer at Plante Moran Financial Advisors, highlights that this differing perception is attributable to wealth distribution: "As expected, investors with large stock holdings remain more optimistic because they have benefited from the positive market trends." Consumer sentiments such as the Sentiment Index shed light on people's future willingness to spend, a crucial factor for the economy. Contrary to these hopes, the current index stands at 55.1 points, a decline of 21% compared to the previous year. Additionally, 65% of respondents expect rising unemployment figures, a significant increase compared to 35% a year ago. Despite a slight easing of inflation expectations, 44% of consumers report that the persistently high prices are significantly straining their savings, the highest level since last November. Oren Klachkin, a financial market economist at Nationwide, predicts that high prices and slow income growth could further curb consumption. Nevertheless, the current Personal Consumption Expenditures report shows that US consumers continued to spend money in August despite rising inflation. Such developments suggest that many consumers could face challenging circumstances in the future to maintain their previous spending levels.