Optimism Weakens And Financial Stress Heightens

The latest IBD/TIPP Economic Optimism Index, a national poll that measures consumer confidence, dropped for the third consecutive month. Investor Business Daily (IBD) and TechnoMetrica Institute of Policy and Politics (TIPP) have established a strong track record of foreshadowing confidence indicators issued each month by the University of Michigan and The Conference Board.

After eight consecutive months of positivity, this downturn has returned the Economic Optimism Index to negativity territory. The September index fell 9.5%, overall, from 53.6 in August to 48.5 this month. For the IBD/TIPP indices, a reading above 50 signals optimism and below 50 indicates pessimism.

The Presidential Leadership Index took an even greater hit than the Economic Optimism Index, falling 15.8 percentage points in September. For the first time since taking office, President Biden’s approval rating has hit negative territory, falling from last month’s 58.7% approval rating to this month’s 49.8%. This could be due to a myriad of issues, some stemming from the president’s policy decisions and others not. 

“September opened with Americans coping with a slew of difficult issues between the removal of troops and rapid evacuation from Afghanistan, the Delta variant-driven COVID-19 surge, the moratorium on evictions coming to a close and jobless aid ending. It is not surprising that sentiment is trending negative,” said Ed Carson, IBD's news editor. “The good news is that inflation could be peaking soon, which might relieve worries about some of the long-term impacts of the present moment. It is also noteworthy that while economic optimism tumbled, fewer people see it as a top issue.”

The National Outlook Index also fell 12.4% in September, with the index moving from 53.1 in August to 46.5 this month. The “Standing In The World” component of the index fell the most at 16.1%, moving from 50.9 last month to 42.7 this month. The “Quality Of Life” index component was the only one to remain positive in September at 54.1 (down 7.8% from 58.7 in August).

Additionally, the Financial Related Stress Index increased for the fifth consecutive month in September. The index moved from 63.2 in August to 64.9 in September — a 2.1% increase in stress. Readings over 50 signal increased stress, while readings below 50 signal a reduction in stress. The last time this country collectively felt reduced stress was February 2020. 

This marks the highest financial stress the country has seen in nine consecutive months, and with a weaker-than-expected job report, moods won’t be improving anytime soon. 

“On top of this, a flurry of post-mortgage forbearance foreclosures is likely to cool the real estate market; rents could escalate, putting families in even more of a pinch,” said Raghavan Mayur, president of TIPP and director of the poll. “With the Fed meeting September 21-22, investors may be bracing for a potential stock market correction in early October, when reality sinks in about the flurry of worrisome September data. At this pivotal junction, it begs the question of whether the pandemic will finally touch the ‘haves’ this fall who have been relatively insulated from COVID-19’s financial impact thus far.”  

The six-month economic outlook, another measure of consumer confidence, fell 17.7% month-over-month to its lowest reading since August 2020 (41.3). Personal Financial Outlook fell 4.8%, but remained in positive territory at 55 this month. Meanwhile, Confidence in Federal Economic Policies fell 7.2% this month, moving from 52.9 in August to 49.1 in September. 

For more information on the IBD/TIPP Economic Optimism Index, read the full analysis at investors.com.