“Consumer sentiment has remained trendless in the same depressed range it has traveled during the past five months”, Richard Curtin, chief economist for the University of Michigan’s consumer sentiment survey, wrote Friday.
The gauge printed 74.1 in the final reading for August, not materially different from the preliminary read.
Curtin’s assessment was generally downbeat. The headline index now sits just 0.4 points above the April to July average, he noted, adding that “although strong gains in consumer spending from the second quarter lows can be anticipated, those gains will significantly slow by year-end without some additional fiscal spending programs to diminish the hardships faced by unemployed workers, small businesses, as well as support for state and local governments”.
As a reminder (and I doubt you need one), the average American doesn’t care about record highs on benchmark stock indices for one simple reason: financial asset ownership is concentrated in the hands of a relative few, which, on an anecdotal assessment anyway, accounts for the disconnect shown in the two figures (above and below).
There is, of course, nothing that says the disconnect in the visuals has to “correct” anytime soon — especially not when the stock market no longer represents corporate America which itself is somewhat detached from Main Street.
Consider that we are now two steps removed on benchmarks like the S&P 500. Just five names (the FAAMG cohort) comprise 23% of the index, which means it’s no longer representative of corporate America as a whole.
And if consumers aren’t confident enough to keep spending absent additional government assistance, the “rest” of corporate America (i.e., everything other than FAAMG, Netflix, and the like) will suffer commensurately, as revenues come up short and the ~$1.5 trillion in new debt taken on by investment grade and high yield borrowers this year proves difficult to service.
The stock market isn’t the economy, and thanks to the absurd concentration in the biggest tech names, the stock market no longer represents corporate America either. Hence the “two steps removed” characterization.
So, what even is the stock market these days? Cap-weighted indices are basically just abstractions of tech billionaires’ legacies.
The ultimate in tragicomedic outcomes is suggested by the figure below, from BofA.
On the current trajectory, the rally will become “the greatest of all time” in both speed and magnitude right around election day.
If millions of Americans are duped into believing that represents “success” for their demographic, it’s entirely possible they’ll vote against their own self-interest (again).