The Federal Reserve has aggressively raised interest rates in an effort to curb inflation, and optimism about the U.S. economic outlook continued to fall over the last month.
The IBD/TIPP Economic Optimism Index dropped 1.2 points in November to a dismal 40.4. The 6.6-point rise in September amid lower gas prices and forgiveness of student loans now appears to be a false dawn.
It fell to within 2.3 of the lowest level in 11 years, which was set in August. The index has been in pessimistic land, below 50 neutral, for 15 consecutive months.
Election Day is a day of intense economic uncertainty for Americans. Biden's approval ratings remain at a low level, with Republicans expecting to retake the U.S. House of Representatives and possibly even the Senate.
The Biden administration’s decision to forgive federal student loans up to $20,000 has led to a large optimism gap between adults aged 18-44 and those over 45. The optimism of younger adults has declined over the last month.
In November, the IBD Economic Optimism Index for those aged 18-24, 25-44, and 45+ was 49.5, down from October's reading of 53.9, but still above August's reading of 43.2, which occurred before President Joe Biden took action on student loan debt. The index for those aged 45 and over was 32.2 in November, compared to 31.5 in August and 33.6.
Share of Americans that believe the U.S. is in recession has decreased to 58%, down from 61% in October & 62% in August. Even so, fears of a recession have increased since May when 48% believed that a recession was underway.
In November, the IBD/TIPP Financial-Related Stress Index fell 1.7 points to reach 67.8. The October figure was only a few points below the record high of 69.8 for April 2020, which has been polled since December 2007. Financial stress increases when the readings are above 50.
In October, employers added 261,000 new workers. Wage growth in the US is also strong at 4.7%. Just 20% of adults claim that their wages have kept up with inflation. 50% disagree. In the meantime, 88% are worried about the direction of inflation in the coming 12 months.
Now, 32% of adult respondents are worried about the loss of a job in their household. This is down from 38% and 34% respectively in October.
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The IBD/TIPP Economic Optimism Index consists of three subindices. The index tracks the opinions of Americans on near-term economic and financial prospects, as well as their support for government policies.
In November, the U.S. six-month economic outlook fell 1.1 points and reached a depressing 34.3. This subindex fell to 30.6 in June, the lowest since July 2008 when the U.S. was mired into a recession.
The subindex for personal finances increased by two tenths to 48.4. This is still only a moderately higher reading than the 45.3 in July, which was the lowest since the IBD/TIPP Economic Optimism Index began in February 2001. In July 2021, the views of personal finances reached a bullish reading of 59.7.
The index of support for federal policies on economics fell 2.6 points, to 38.6. The reading of 35.3 in August was the lowest since January 2014. This gauge reached a high of 56.4 in 2021 after additional rounds of stimulus checks, and amid President Biden's push for more expansive policy. The Federal Reserve has raised interest rates in an attempt to rein in inflation that stimulus caused.
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After a two-month break, the U.S. Economic Optimism index fell 3.8 points and now stands at 47.7.
Investors are expressing moderate pessimism amid a turbulent stock market, in which the Fed's key interest rate has risen from zero to nearly 4%, and is not yet done.
The Dow Jones Industrial Average had fallen 10.8% since its highest closing date on January 4, 2008. S&P 500 has fallen 20.6% since its peak while Nasdaq Composite has dropped 33.3%.
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IBD's The Big Picture daily column is a great way to stay up to date on market trends and how they affect your trading decisions.
Investors are still far more optimistic than noninvestors. Noninvestors' IBD/TIPP Index rose 1.7 points, to 36.2. This is a deeply pessimistic index.
The November IBD/TIPP poll reflects online survey results of 1359 adults conducted between Nov. 2 and 4. The results are accompanied by a credibility range of +/-2.8 points.
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