Many Americans are in a funk right now.
They have sticker shock at the grocery store. Mortgage and consumer loans are more expensive. Violence has spiked in urban areas. And political leadership in Washington, D.C., is less than inspiring.
Indeed, CNN – hardly a conservative media outlet – recently released a poll showing that 66% of Americans say President Biden’s reelection in 2024 would be a “disaster” or “setback” for the country.
The negativity goes beyond political and economic concerns, however.
Pew Research reports that 6 in 10 Americans say that life “for people like them” is worse today than it was 50 years ago.
(More on that in a moment.)
Given all the economic and political pessimism, it surprises many investors that the S&P 500 is back in a bull market.
(A bull market is defined as a 20% rise off the bear market bottom, which occurred last October.)
Yet the stock market looks forward not back. And many trends appear decidedly friendly.
The widely forecast 2023 recession hasn’t appeared. GDP growth is still positive.
And the Atlanta Fed’s GDPNow estimate of the current quarter – drawn from data released so far – puts growth close to 2%, way higher than the drop economists predicted just two months ago.
Even Goldman Sachs recently reduced its estimate of the chances of a recession this year to 25% from 35%.
The crisis in regional banks – which looked like a developing contagion in April – has subsided.
The debt-limit standoff was successfully negotiated without a default, despite predictions of doom by members of both parties.
Unemployment remains near record lows. (And there are more than 10 million job openings in this country.)
First quarter corporate earnings came in better than expected.
The Federal Reserve remains concerned about prices but has paused its interest rate hikes for now.
Inflation is still elevated, but it is just half what it was a year ago.
And bond yields are signaling that it will come down further.
Oil is $40 a barrel lower than its peak last summer – and $55 a barrel lower than it was before Russia invaded Ukraine.
Speaking of Ukraine, last year Russia expected to take over that neighboring democracy in a matter of days.
Instead, its army was routed and pushed back to the eastern 20% of the country.
It is now struggling to hold on even to that in the face of Ukraine’s counteroffensive.
That’s good news not just for Ukrainians but for freedom-loving people everywhere.
The global supply chain continues to unsnarl. Car lots are gaining inventory. Semiconductor supply is back to normal.
And the labor market is normalizing, too.
The participation rate for people under age 55 is higher than it was before the pandemic.
Wage gains are subsiding, taking the pressure off the Fed to raise interest rates further.
Housing construction has stabilized and is even expanding again.
Building permits rose 5% in May and housing starts soared 22%, a 13-month high.
In sum, there is plenty of good news out there, even if the media gives it short shrift.
For all these reasons, stocks have pushed higher.
And yet… most Americans believe that life for “people like them” was better 50 years ago?
That is an incredible finding.
Yes, times were simpler back then in many ways. And popular music was certainly better. But life wasn’t easier.
Inflation-adjusted incomes and household net worth were a small fraction of what they are now.
Consumer choices were limited. And so were economic opportunities.
(High inflation, low growth and the oil embargo famously led to “stagflation” in the 1970s.)
Many of the labor-saving devices that we depend on today – not least of all personal computers and smartphones – hadn’t been invented yet.
Moreover, it takes ignorance of historic proportions for women, Black people and members of the LGBTQ community to insist that life was better “for people like them” in 1973.
So how could so many Americans believe this?
I’m eager to hear readers’ responses in the comment section.
I’ll provide my own take in Monday’s column.