The good news is, household inflation expectations didn’t “moon” in the latest edition of the New York Fed’s consumer poll, released on Monday.
The bad news is… well, pretty much everything else, and it’s worth noting that the inflation outlook will likely worsen in the April vintage, which won’t be released for another month.
Most notably, unemployment expectations rose again, jumping another five points MoM to reach 44%.
As the figure shows, that’s the highest since April of 2020, which is to say the highest since the actual unemployment rate briefly spiked to 14.8%.
March’s increase was the second outsized jump in a row, and as the color accompanying the survey noted, it was “broad-based across age, education and income groups.”
So, the macro uncertainty stoked by Donald Trump’s tariffs just manifested as the most dramatic deterioration in household perceptions of the labor market outlook in the (admittedly short) history of the NY Fed’s survey outside of the spike associated with the pandemic. Congratulations, “Tariff Man.”
At the same time, households’ outlook for their personal finances worsened materially. The share expecting to be worse off financially a year from now jumped to 30%.
As the figure shows, that’s the highest level since October of 2023 when, you might recall, US Treasurys were struggling with a sharp term premium repricing, which drove yields to cycle highs. Jerome Powell and Janet Yellen rescued Joe Biden from that episode. Something tells me Jay ain’t interested in rescuing Trump, and Yellen’s not around.
Relatedly, expectations for household income growth fell to 2.8%, below the 12-month trailing average. As the survey noted, “the decline was most pronounced for respondents with at most a high school degree and for those with annual household incomes under $50,000.” In other words: Trump’s base was hit hardest.
Insult to injury: The mean perceived probability US stocks will be higher a year from now fell to 33.8%, the lowest since June of 2022, when headline US inflation was 9%, consumer sentiment was at an all-time low and the Fed began hiking in 75bps increments.
I think history will look back at this time when billionaires could walk into the White House and throw down a sack of money to get the outcome they want- which is to keep the system going in such a way to keep the wealth flowing to them and allow them to keep their wealth upon death. In a generation or two, when their less impressive kids are handling the handed-down fortune, the “people” will have an easier time toppling them. At which point in time, there will be massive selling out of the US stock market (to pay estate taxes or by the US government to spend elsewhere).
In the meantime, this is a golden opportunity to invest alongside the billionaires of the world. Set it and forget it.