Financial Stress Eases as Americans Welcome 2024.
The RealClearMarkets/TIPP Economic Optimism Index, a leading gauge of consumer sentiment, gained 11.8% in January to 44.7. Despite the rise, the index remains in negative territory – for 29 consecutive months now.
Boosted by stock market gains in December, optimism among investors gained 20% from 45.8 in December to 54.9 in January, while it rose by 5% among non-investors, from 37.5 in December to 39.3 in January.
The RCM/TIPP Economic Optimism Index has established a strong track record of foreshadowing the confidence indicators issued later each month by the University of Michigan and The Conference Board. From February 2001 to October 2023, TIPP released this index monthly in collaboration with its former sponsor and media partner, Investor’s Business Daily.
RCM/TIPP surveyed 1,401 adults from January 3 to January 5 for the January index. The online survey utilized TIPP’s network of panels to obtain the sample.
The index and its components range from 0 to 100. A reading above 50.0 signals optimism and a reading below 50.0 indicates pessimism. 50 is neutral.
The RCM/TIPP Economic Optimism Index has three key components. In January, all three components improved.
- The Six-Month Economic Outlook, which measures how consumers perceive the economy's prospects in the next six months, increased from 34.3 in December to 39.3 in January, marking a 14.6% increase. In October, this component had posted 28.7, its lowest reading since the index debuted in February 2001.
- The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, gained 11.1% from its previous reading of 49.5 to 55.0 this month. By crossing the neutral reading of 50.0, this component has now returned to positive territory.
- Confidence in Federal Economic Policies, a proprietary RCM/TIPP measure of views on the effectiveness of government economic policies, rose from 36.1 in December to 39.8, reflecting a 10.2% improvement.
RCM/TIPP also releases our companion index, called the RCM/TIPP Financial-Related Stress Index, the only metric to track the financial stress felt by Americans monthly.
Reflecting Americans’ New Year optimism, the Financial-Related Stress Index dropped by 4.3 points, or 6.2%, from 69.0 in December to 64.7 in January. In October, the metric recorded 70.5, its highest reading since December 2008, when it stood at 71.0.
The higher the number, the more stress. Readings above 50 signal increased stress, while those below 50 indicate lower stress, with 50 considered neutral. For context, the last time the index posted below 50.0 was before the onset of the pandemic in February 2020, when it stood at 48.1.
"There's a bullish quality to life and investment in the United States that imbues measures of optimism with - yes - optimism. It's fascinating to track snapshots of this on a monthly basis with the RCM/TIPP measure," said John Tamny, the editor of RealClearMarkets.
“Optimism got a huge lift from investors driven by the upbeat performance of the stock market, with the S&P 500 index experiencing a nearly 5% gain in December. Further, the share of respondents who think the U.S. is in a recession dropped from 50% in December to 43% in January, and the share who think the economy is improving increased to 30% from 23% in December,” said Raghavan Mayur, president of TechnoMetrica, who directed the survey. “Financial stress also reduced significantly as Americans usher in the New Year.”
Economic Optimism Index Breakdown
This month, only five of the 21 demographic groups we track, including age, gender, race, and education, are in positive territory above 50 on the Economic Optimism Index. In contrast, there were two in December, six in November, and one in October. However, January data shows a broad-based improvement. While 19 of the 21 groups improved in January, two declined.
For the Six-Month Economic Outlook component, only four of the 21 groups that RCM/TIPP tracks scored in optimistic territory, compared to one in December, five in November, and none in October. Economic Outlook sentiment improved for 19 of the 21 groups, compared to eight in December, 20 in November, and none in October.
For the Personal Financial component, 15 of the 21 groups that RCM/TIPP tracks were in optimistic territory compared to 10 in December, 11 in November, and five in October. Eighteen groups rose after eight in December, 17 in November, and two in October.
For the Federal Policies component, only four of the 21 groups were above 50.0 compared to one in December, six in November, and one in October. Seventeen groups rose vs. six in December, 20 groups in November, and one in October.
About TechnoMetrica/TIPP
TIPP is the polling unit of TechnoMetrica, a nationally renowned survey research and market research firm dedicated to providing clients with expert data-driven analysis to facilitate informed decision-making in their businesses. The TIPP Poll is considered the gold standard survey, having the unique distinction of being the most accurate presidential poll in the past five election cycles. The tippinsights unit provides editorials and commentaries on national and international issues, often appearing on the RealClearPolitics website.
About RealClearMarkets
RealClearMarkets (RCM) is a one-stop shop for market-related news, analysis, and commentary. RealClearMarkets collects and publishes business, finance, and economic content from across the ideological spectrum. Site features include Market Data, Off the Street Blogs, Quotes, Research Reports, Videos, Topics, and Facts & Fallacies.
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