Consumer sentiment is sinking across the board — except for Americans with the most stocks

The preliminary reading on the University of Michigan’s sentiment index fell to 50.3 in November from 53.6 last month, nearly matching the all-time low of 50 in June 2022, when the annual inflation rate reached post-pandemic highs.

“With the federal government shutdown lasting more than a month, consumers are now expressing concerns about the potential negative consequences for the economy,” Joan Hsu, director of the poll, said in a statement on Friday.

She added that the decline was widespread and was seen across different age groups, income brackets and political affiliations.

But not everyone followed this trend.

“One major exception is that consumers with the largest portion of stock holdings reported a notable 11% increase in sentiment, supported by continued strength in stock markets,” Hsu said.

The poll closed ahead of Tuesday’s election, which revealed continued voter dissatisfaction over affordability as food and energy prices rise.

The timing is also notable given that it did not capture the recent stock market selloff that sent the Nasdaq to its worst weekly loss since April’s trade war chaos.

This came as investors became increasingly concerned about the AI ​​boom appearing like a bubble that could soon burst. Until last week, the stock market was on a hot streak, hitting new record high after record high, with the S&P 500 closing at the 7,000 mark.

Stocks fuel K-shaped confidence

The market’s impact on consumer confidence comes as stock ownership has expanded over the past five years to include more income and age groups.

A separate University of Michigan report released last month said the increase in market participation was particularly large among low-income consumers, while the participation rates of younger and older consumers have caught up with middle-aged consumers.

In fact, a survey released last month from BlackRock and the Commonwealth Foundation showed that more than 54% of Americans earning between $30,000 to $79,999 annually are now retail capital markets investors. More than half of this group started investing in the past five years.

Stock ownership has highlighted the disparity in consumer sentiment in recent months: Investors have become more optimistic while non-investors have become more pessimistic, according to University of Michigan data from October. Participants with the top 20% of stock holdings are particularly bullish.

This dropout reflects the K-shaped economy that emerged as higher-income Americans continued to spend and supported overall consumption, while others retreated.

On the other hand, the so-called wealth effect of rising asset prices on consumer spending has become stronger in the past 15 years, making it more difficult to separate the stock market from the economy.

Today, a $1 increase in stock wealth results in a marginal propensity to consume of $0.05, compared to less than $0.02 in 2010, according to Oxford Economics.

The University of Michigan noted in October that sentiment among stock market participants had been on the rise since May — after plunging in April when President Donald Trump shocked global markets with his Emancipation Day tariffs.

By contrast, non-shareholder sentiment has continued to decline and has already reached post-pandemic lows.

“These patterns are consistent with the fact that strong asset values ​​are supporting consumer sentiment
“Only for those who own those assets,” the report said. “At the same time, given that wealthier, higher-income consumers generate a disproportionate share of overall spending, the recent rise in sentiment among these households may help boost consumer spending even as views of the economy are relatively weak from a historical perspective.”