WSJ: Stock Market and Consumer Sentiment Diverge

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WSJ - source, Getty

The gulf between monthly percentage change of the S&P 500 and the University of Michigan’s consumer sentiment survey grew to 32 percentage points last month — the widest gulf in history for the data that dates back to 1978, according to The Wall Street Journal.

Even as unemployment grows to record highs and consumer spending fell at its fastest rate since 1959, stocks continued to rise.

The S&P has grown 34 percent since March 23, cutting its losses for the year to 7.4 percent, the newspaper reported.

“The current situation is quite unique,” Richard Curtin, a research professor who is the chief economist of the University of Michigan’s sentiment surveys, told WSJ. “Consumers are very negative about the current economy. It’s about as bad as we’ve ever recorded.”

However, the survey showed that those who responded expect the economy to rebound quickly, as the source of the decline was primarily driven by the covid-19 pandemic; compared to previous recessions, the fall in the expectations index was much less severe.

Wall Street is betting on a quick recovery, while sentiment reflects employment numbers, said Lakshman Achuthan, co-founder of the Economic Cycle Research Institute.

In April, 20.5 million workers were laid off. The official unemployment rate is 14.7 percent, but experts estimate the number is closer to 25 percent.

But, it is possible that consumer sentiment is lagging a recovery. In 2009, the market bottomed in March, and the recession ended three months later.

“Technically, you have a recovery,” said Achuthan. “But it won’t feel like it.”

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