Americans’ Financial Stress Hits a 42-Month Low, Eased by Confidence in Trump’s Economic Policies
The RealClearMarkets/TIPP Economic Optimism Index, a leading gauge of consumer sentiment, rose by 1.5% in December to 54.0, reaching its highest level in 40 months since August 2021 (53.6). The index had been in negative territory for 38 consecutive months, starting in September 2021, and broke out decisively in November after President Donald Trump's historic return as the 47th President.
November’s reading of 54.0 is 8.3% higher than its historical average of 49.1.
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 1,411 adults on November 27 and 29 for the December 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 below 50.0 indicates pessimism. 50 is neutral.
The RCM/TIPP Economic Optimism Index has three key components. In December, one of the three components advanced, and two declined
- The Six-Month Economic Outlook, which measures how consumers perceive the economy's prospects in the next six months, declined slightly by 0.5%, from 55.9 in November to 55.6 in December. Last month, the component broke into positive territory for the first time in 39 months, with an 18.2% gain after remaining below 50.0 in pessimistic territory from September 2021 to October 2024. In October 2023, it posted a reading of 28.7, its lowest since the index debuted in February 2001.
RCM/TIPP also releases our companion index, known as the RCM/TIPP Financial-Related Stress Index, the only metric to track the financial stress felt by Americans monthly.
The index improved 7.2 points, or 10.7%, from 67.5 in November to 60.3 in December.
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.
The index’s historical average since December 2007 stands at 60.2. December's reading of 60.3 surpasses this historical average by a smidgen of 0.1%, indicating that Americans are experiencing normal stress levels.
Notably, the index peaked at 70.5 in October 2023, marking its highest reading since December 2008 (71.0). Since then, it has declined for the better, reaching 60.3 in December.
“Progress is as American as apple pie, and the only barriers to it are governmental. The change in sentiment signals a belief that government was in the way in such a way that optimism was in decline. No longer, it seems. The speculation here is that the electorate feels Donald Trump governs better than he talks and that barriers to progress will soon enough be removed,” said John Tamny, the editor of RealClearMarkets.
“Americans' economic confidence has soared following the election of Donald Trump as the 47th President, with the optimism index hitting its 40-month high in December. However, the new president has his job cut out for him: 80% of Americans are worried about inflation, and another 75% are concerned about a slowdown in the next 12 months," said Raghavan Mayur, president of TechnoMetrica, who directed the survey. "Financial stress eased significantly in December, recording its 42-month low, a welcome sign of confidence Americans place in the new president's economic policies.”
Economic Optimism Index Breakdown
This month, 15 of the 21 demographic groups we track, including age, gender, race, and education, are in positive territory above 50 on the Economic Optimism Index. For comparison, there were 18 in November, eight in October, and seven in September. Ten groups improved on the index, compared to 18 in November, 14 in October, and 17 in September.
For the Six-Month Economic Outlook component, 15 of the 21 groups that RCM/TIPP tracks scored in optimistic territory, compared to 19 in November, seven in October, and five in September. Economic Outlook sentiment improved for nine of the 21 groups, compared to 18 in November, 16 in October, and 16 in September.
For the Personal Financial component, 19 of the 21 groups that RCM/TIPP tracks were optimistic compared to 20 in November, 17 in October, and 14 in September. Three groups rose compared to 18 in November, 12 in October, and 14 in September.
For the Federal Policies component, only six of the 21 groups are above 50.0, compared to one in November, three in October, and three in September. Eighteen groups rose compared to 16 in November, eight in October, and 16 in September.
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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
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