Americans' view of the outlook for the U.S. economy still isn't great, but it's brighter than it has been in 16 months, the new IBD/TIPP Poll finds.
The overall IBD/TIPP U.S. Economic Optimism Index rose a half-point to 47.4 in April. That puts the index at its highest level since December 2021. Still, the index remained in pessimistic territory, below the 50 neutral level, for a 20th straight month.
Now 55% of adults polled think the U.S. economy is in a recession, up from 53% the prior two months. However, that figure reached 61% in October.
Investors, Noninvestors Divided On U.S. Economy
Among investors, the U.S. Economic Optimism gauge remained at a lofty level, but eased 3 points to 58.3. Meanwhile, deep pessimism among noninvestors showed a little letup, as the IBD/TIPP economic index ticked up 2.8 points to 39.3.
In March, the 24.8-point optimism gap between investors and noninvestors was a record for the IBD/TIPP Poll dating back to 2001.
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. On Monday, the S&P 500 closed at its highest level since mid-February, recouping all its losses since a banking crisis erupted last month with the sudden failure of SVB Financial Group. The Federal Reserve expects tighter bank credit to slow economic growth to a crawl later this year. Still, the outlook for fewer Fed rate hikes has been a near-term positive for financial markets.
The S&P 500 is up 7.4% for the year and 15.3% 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 average hourly wage growth, meaning that many households have seen their buying power erode.
The IBD/TIPP Poll finds that 28% of workers say their wages have kept pace with inflation, down from 30% in March. Meanwhile, 45% say wages haven't kept up with inflation, up from 44% in March.
The new IBD/TIPP Financial-Related Stress Index jumped 2.3 points to 67.9, the highest since last October. Readings above 50 reflect rising stress.
The uptick in financial stress comes following expiration of a $95 monthly pandemic boost to Supplemental Nutrition Assistance Program benefits for millions of households.
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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 April, the six-month outlook for the U.S. economy was unchanged at a gloomy 41.6. However, this subindex got as low as 30.6 last June, the lowest level since July 2008, when the country was mired in a recession.
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The personal finances subindex rose three-tenths of a point to 55.3, the highest since August 2021, when a roaring bull market was still intact. July's 45.3 reading was the weakest in the history of the IBD/TIPP Economic Optimism Index dating back to February 2001.
The gauge of support for federal economic policies rose 1.1 points to 45.3. 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 April IBD/TIPP Poll reflects online surveys of 1,365 adults from March 29-31. 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.
