US Economic Optimism Tumbles As Investors Become Gloomier

Optimism on the US economy dived to an 18-month low as omicron infection levels exploded in addition to the hot inflation hitting unprecedented highs according to the latest IBD/TIPP Poll.

The major shift came among investors, who are suddenly feeling more bearish about the US economic scene than they have been in more than five years.

The overall IBD/TIPP Economic Optimism Index, an early monthly read on consumer confidence, sank 3.7 points to 44.7, firmly downbeat territory. Readings below the neutral 50 level reflect pessimism.

Big swings in sentiment have become common as US citizens have navigated pandemic-related ups and downs, along with hot and cold fiscal stimulus.

Yet the broad economy and job market appear to be striding ahead. The unemployment rate tumbled to 3.9% in December, the Lbour Department reported on Friday, though the data largely preceded the omicron surge.

As the Federal Reserve turned more hawkish, Treasury yields jumped and the stock market, particularly the tech sector, took a beating, the broad US Economic Optimism gauge dived 9.6 points to 48.8 among self-described investors. That’s the lowest level since September 2016.

The Nasdaq suffered its sharpest four-session loss since September 2020, amid the IBD/TIPP polling period. The Nasdaq tumbled below its 200-day line Monday morning rebounding to close slightly positive.

IBD/TIPP counts as investors those respondents who say they have at least $10,000 in household-owned mutual funds or equities.
Investors remain far less downbeat than non-investors. Among non-investors, the IBD/TIPP index lost eight-tenths of a point to 42.7.

US Economic Optimism Index Components
The IBD/TIPP Economic Optimism Index is a composite of three major sub-indexes tracking views of near-term prospects for the US economy, the scene for personal finances and support for government economic policies.
In January, the six-month US economic scene index slid 4.9 points to 37.9, the lowest level since July 2020.

The economic scene reading for Democrats tumbled 9.4 points to 50.2. Among independents, the reading slid 2 points 31.9, while Republicans were fractionally higher at 25.5.

The personal finances sub-index fell 2.6 points to 52.3, well off its peak but still reflecting modest optimism. The gauge of support for federal economic policies sub-index sank 3.6 points to 43.9.