Investors and upper-income groups grew more bullish on the outlook for the U.S. economy over the past month, even as noninvestors and low- to moderate-income groups remained in a deep funk, the new IBD/TIPP Poll finds.
The overall IBD/TIPP U.S. Economic Optimism Index rose 1.8 points to 46.9 in March. That put the index at its highest level since December 2021. Still, the index remained in pessimistic territory, below the 50 neutral level, for a 19th straight month.
A steady 53% of adults polled think the U.S. economy is in a recession, down from 55% in January. That figure reached 61% in October.
Investors, Noninvestors Divided On U.S. Economy
Among investors, the U.S. Economic Optimism gauge jumped 4.2 points to a strongly upbeat 61.3, the highest since August 2021, when the bull market was still chugging. However, deep pessimism shows little let up among noninvestors, as the IBD/TIPP economic index ticked up one-tenth of a point to 36.5.
The 24.8-point optimism gap between investors and noninvestors is a record for the IBD/TIPP Poll dating back to 2001. The prior record of 20.7 points came in February.
IBD/TIPP counts as investors those respondents who say they have at least $10,000 in household-owned mutual funds or equities.
Investors have had reason to smile. While the S&P 500 slipped 2% in February, it's up 5.4% for the year and 13.2% from the bear-market closing low on Oct. 12. Still, there have been a series of bear-market rallies and it's not yet clear that this one is for real. Be sure to read IBD's daily afternoon The Big Picture column to get the latest read on the prevailing stock market trend and what it means for your trading decisions.
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However, noninvestors see less reason to celebrate. Inflation still exceeds wage growth, meaning that the buying power of the average hourly wage continues to fall.
The IBD/TIPP Poll finds that 30% of adults say their wages have kept pace with inflation, up from 27% in February and 21% in January. Meanwhile, 44% say wages haven't kept up with inflation, but that was down from 48% in February and 52% the prior month.
The optimism gap is even wider between higher-income groups and low- to moderate-income groups. Among those earning at least $75,000, the Economic Optimism Index jumped 9 points to 67.8. Meanwhile groups earning less than $75,000 remain pessimistic, with Economic Optimism Index readings below 40.
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U.S. Economic Optimism Index Components
The IBD/TIPP Economic Optimism Index is a composite of three major subindexes. They track views of near-term prospects for the U.S. economy and personal finances, along with support for government economic policies.
In March, the six-month outlook for the U.S. economy rose 1.9 points to a less-gloomy 41.6. In June, this subindex got as low as 30.6, the lowest level since July 2008, when the country was mired in a recession.
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The personal finances subindex rose 2.4 points to 55, a level last seen in September 2001. July's 45.3 reading was the weakest in the history of the IBD/TIPP Economic Optimism Index dating back to February 2001. Views of personal finances had reached a bullish 59.7 in July 2021, before inflation took off.
The gauge of support for federal economic policies rose 1.1 points to 44.2. The gauge, which hit an eight-year low of 35.3 in August, got as high as 56.4 in June 2021, after more rounds of stimulus checks and amid a big push for more expansive policies from President Biden. Now, however, stimulus has lapsed and the Federal Reserve is hiking interest rates to try and rein in the inflation to which stimulus contributed.
The March IBD/TIPP Poll reflects online surveys of 1,370 adults from March 1-3. The results come with a credibility interval of +/- 2.8 points.
Please follow Jed Graham on Twitter @IBD_JGraham for coverage of economic policy and financial markets.
