Wall Street likes the economy more than voters do
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Illustration: Sarah Grillo/Axios. Photos: Tayfun Coskun/Anadolu Agency and Olivier Douliery/Agence France Presse
The stock market rallied during President Trump's first six months in office this year, despite a volatility spike in April, but a new poll shows Main Street doesn't feel the same optimism.
Why it matters: While investors are pricing in a post-tariff rebound, the general public are still concerned about economic issues like inflation, a reminder that the stock market is not the economy.
By the numbers: Despite a volatile April off the back of tariff news, the S&P 500 is up 7% year to date, outpacing the historical average.
- Meanwhile, 70% of respondents said the administration isn't focusing enough on lowering prices in a CBS News/YouGov poll released Sunday.
- The administration is focusing too much on tariffs, according to 61% of those surveyed, and 60% said they oppose the use of tariffs entirely.
What they're saying: "The broader economy is slowing" and "capital markets are comfortable with the idea of a slowdown," Eric Freedman, the chief investment officer at U.S. Bank Asset Management, told Axios.
- Markets are forecasting a "bounce back" once tariff discussions are in the rearview mirror, meaning investors aren't too concerned about near-term weakness, he said.
Between the lines: Looked at this way, it's not that investors necessarily disagree with voters about the state of the economy.
- Traders are just pricing in the rebound, while constituents are worried about their financial lives before that rebound kicks in.
Yes, but: While voters may not feel great about the economy, their spending patterns indicate otherwise.
- Retail sales jumped more than expected last month, and big banks largely reported increased card spending during the second quarter.
- GDP growth, driven mainly by consumer spending, is estimated to come in above 2% for the quarter, per the Federal Reserve Bank of Atlanta.
Be smart: "There's a lot of divergence within consumers," said Freedman, who monitors middle-income consumer behavior for a better sense of the economic path forward.
- High stock prices are fueling spending for higher-income consumers, he said, in a phenomenon known as the wealth effect.
- If increased spending is coming from largely higher-income folks, that could be clouding the broader economic picture.
The bottom line: If stocks are up, that doesn't necessarily mean investors think the economy is in great shape.
- It typically means they believe the underlying assets represented by stocks should be worth more. That view can be shaped by a variety of factors outside of economic performance.
