The “wealth effect” for consumers is evidenced by the significant increase in stock and real estate values. The value of equities and household real estate have substantially contributed to the surge in net worth, which stands at a remarkable 7.6 times disposable income.
However, recent data shows a decline in consumer sentiment, thus indicating a shift in consumer outlook. The University of Michigan sentiment index recorded an 8.1-point plunge in May to 69.1, while the Conference Board’s consumer confidence index rebounded slightly to 102 in May.
Ideally, market conditions are favorable when confidence is low but trending upwards, which fosters a more sustainable economic environment.
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