You can steer an oil tanker through the divide between how Wall Street and Main Street view the US economy.
The S&P 500 (^GSPC) is at an all-time high, while consumer sentiment is at an all-time low (see chart below), Creative Planning chief markets strategist Charlie Bilello pointed out.
“We’ve never seen a gap this wide between Wall Street and Main Street,” said Bilello, whose sharp analysis on markets and the economy has yielded him more than 750,000 followers on X.
The gap isn’t too hard to understand, although it is head-shaking to witness.
The latest University of Michigan Consumer Sentiment Index showed that US consumer confidence this month has plummeted to a record low of 47.6.
This represents a staggering 11% plunge from March and is the lowest reading in the survey’s 74-year history. It even fell below the levels seen during the 2008 financial crisis and the 1980s inflationary shock. The decline was broad-based across all age groups, income levels, and political parties.
Read more: March CPI breakdown: Iran war sends gas prices skyrocketing, airfare climbing
Dour consumer moods reflected the spike in gas prices related to the Iran war. Year-ahead inflation expectations increased to 4.8%, the largest one-month jump in a year.
“Open ended comments show that many consumers blame the Iran conflict for unfavorable changes to the economy,” the report said.
While many households struggle with higher food and transportation bills, Wall Street thinks their pain will prove fleeting.
The S&P 500 broke out to fresh records last week to above 7,000. The conventional thinking is that the worst of the Iran conflict is in the rearview mirror. Therefore, businesses will get back to normal and prices will cool in the coming months.
“The bearish equity market views revolve around stagflation narrative, with hits to both activity and to liquidity/rates outlook expected. We continue to disagree with both,” JPMorgan strategist Mislav Matejka wrote in a note on Monday.
He added, “Overall, we have consistently argued in the past weeks that one should not succumb to the bearish views … and that one should use the weakness to buy, with markets showing oversold signals from March 23, once the initial de-risking became advanced. It appears that many got whipsawed, turning bearish as the market fell, and therefore will need to rebuild positions, which should provide legs to the rebound.”
A prime example of the aforementioned divide.
Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
