The S&P 500 stock index hit a new high Tuesday, even as consumer confidence in the economy sits at its lowest level in more than a decade. The index rose nearly 1 percent on Tuesday, above 7,840 heading into midday, surpassing a level last seen in August.
The buoyant market is propelled in part by bets that massive corporate spending on artificial intelligence will pay off. It provides a split-screen view of an economy that consumers, according to the Conference Board, feel even worse about it than they did during the coronavirus pandemic.
“The old received wisdom that the stock market is not the real economy is still true,” said Bill Adams, chief U.S. economist at Fifth Third Commercial Bank. “The job market is adding jobs in low gear, and wage growth is lagging behind the cost of living, which are weighing on consumer sentiment.”
But those with investment portfolios have a much rosier outlook these days than those without.
“Both the wealthy as well as older Americans who’ve saved in their 401(k)s over their working lives are seeing their spending power rise faster than the cost of living,” Adams said. “Those are the consumers who continue to propel U.S. retail sales and the consumer-facing economy.”
On the other hand: “Households that are living paycheck to paycheck are not seeing their inflation adjusted spending power go up,” he said.
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