Here’s a chart for you:
Consumer sentiment readings date back to the early 1950s.
The last reading was the lowest recorded.
Yes, you read it right. We are currently sitting at the lowest level of consumer sentiment in the last 75 years!
Seriously people?
At a lower level than the Great Financial Crisis, when the stock market crashed by almost 60%, the financial system nearly collapsed and the unemployment rate rose above 10%.
This rate is lower than what followed the 50% stock market crash, recession, and the bursting of the dot-com bubble, which included 9/11.
Mortgage rates, which were lower than in the early 1980s when inflation reached double digits, reached almost 20% and two recessions occurred within 3 years.
It’s lower than it was in the 1970s, when the stock market was halved, inflation skyrocketed and the economy was mired.
Lower than the damn Covid epidemic!
We haven’t had a real recession in 17 years. The stock market seems to be hitting new all-time highs every day. The homeownership rate is 65 percent. Two-thirds of American households own stocks. The unemployment rate is 4.3 percent.
Americans have never been as rich as they are today. This is true:
Both housing and stock markets boomed this decade. But sentiment readings have collapsed.
Is everything perfect? Of course not. It’s never like that. But come on.
So why does this happen?
Some theories:
Inflation. People really hate paying higher prices. But inflation was much higher in the 1970s and early 1980s. And unemployment was much higher. Maybe the shock of high prices is so great because we haven’t experienced anything like this in forty years?
Housing costs. This is a big deal, especially for young people. Housing prices are at crisis level. But again, most people in this country already own a home. We are currently sitting on a record amount of home equity.
AI is worried. Technological innovations often lead to exciting times. There is some excitement about AI, but most people either hate it or don’t want it:
It probably doesn’t help that all the AI founders are saying this technology will steal all our jobs.
Wealth inequality. Of course, financial asset prices are higher, but these assets are concentrated in the hands of the ultra-rich.
The top 10% controls nearly 70% of the total wealth in the US, including 87% of stocks. The top 1 percent owns a staggering 32 percent of the wealth and almost 50 percent of the stocks.
bottom 50% This decade has seen a huge increase in wealth, but they still control only 2.5% of the total net worth in America.
Epidemic. Look at the decline in consumer sentiment in 2020 in this chart. It was a bigger gap than 2008. Something about the pandemic seems to have changed our collective mental state as a country.
Policy. Now it feels like every issue is between us and them. You must take a side entirely according to your own politics. Take a look at how sentiment changes depending on who’s in charge:
It’s so tiring.
Someone he asked Would Nvidia’s Jensen Huang rather relive his past 20s or be 20 today:
I thought our 20s were happier than these 20s. I think everyone deserves to be indifferent for a while and not have all the problems of the world placed on their shoulders on day one. We are raising a very cynical and overly knowledgeable generation. They are sarcastic, not because they are sarcastic by nature. They are cynical because they see too much. There are so many things.
Growing up in the 1990s and early 2000s, it was much easier to be indifferent and naive to the world at large. Nobody talked about politics. You didn’t force-feed news or ugly headlines and opinions via social media.
We didn’t have cell phone cameras or the anxiety that comes with being on social media.
I wholeheartedly agree that being young today is much more difficult.
The polls are broken. I wrote about this before. Who answers these surveys anymore? How are questions asked? You should look at what people do, not what they say.
I am good. People also have a tendency to say The world in general is going to hell, but I am very well, thank you very much.
Just look at the results Fed’s economic well-being report:
The rate of those who say that their financial situation is good or that they live comfortably is still very high. This is evident when you interact with people in the real world.
Sentiments regarding the local and national economy are much worse.
Why is this the case?
The constant drumbeat of negativity. Our brains are not developed enough to cope with the deluge of negativity thrown at us every day.
Human history is a progression interspersed with very bad events. Things are no worse today than in the past. Now you have to constantly learn about them because now the sum of human knowledge and activities is in our pocket.
The information age can turn you into a cynic without even realizing you’ve become radicalized.
Maybe we’ll get used to it over time. For now, sentiment readings are still off and will likely be that way for a while.
In the meantime, turn off the cable news channels for a while. Log out of social media for a few days. Avoid politics like the plague.
Go out.
Your personal consumer sentiment will improve instantly.
Michael and I talk about consumer sentiment and much more in this week’s Animal Spirits video:
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Further Reading:
Longest Economic Boom Ever?
Now here’s what I’ve been reading lately:
Books:
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