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Americans' Economic Confidence Declines Sharply In May: RCM/TIPP

Investors’ economic sentiment turns bearish in May.

The RealClearMarkets/TIPP Economic Optimism Index, a leading gauge of consumer sentiment, plummeted 3.2% in May to 41.8. What's more concerning is that the Index has remained in negative territory for a staggering 33 consecutive months since September 2021.

While optimism among non-investors showed a modest improvement of 9.6% from 36.6 in April to 40.1 in May, investor sentiment took a significant hit, declining by 15.7% from 54.9 in April to 46.3 in May.

The RCM/TIPP Economic Optimism Index is the first monthly measure of consumer confidence. It 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 1,435 adults from May 1 to May 3 for the May Index. The online survey utilized TIPP's network of panels to obtain the sample. A more detailed methodology is available here.

RCM/TIPP Economic Optimism Index

The RCM/TIPP Economic Optimism Index has three key components. In May, two of these components declined, while one showed improvement. 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 Six-Month Economic Outlook, which measures how consumers perceive the economy's prospects in the next six months, dropped sharply from 38.8 in April to 35.7 in May, marking an 8.0% decrease. In October 2023, this component 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, improved slightly - 1.4% from its previous reading of 50.6 in April to 51.3 this month. In January, the component crossed above the neutral reading of 50.0 and has since remained positive for five consecutive months.
  • Confidence in Federal Economic Policies, a proprietary RCM/TIPP measure of views on the effectiveness of government economic policies, declined sharply from 40.3 in April to 38.5 this month, reflecting a 4.5% drop.

Party Dynamics

Democrats posted the highest confidence levels in May, at 57.5, despite a decline from 60.6 in April, a 5.1% drop.

Meanwhile, Republicans' confidence improved 0.6 points to 30.5 this month, a gain of 2.0%. It has stayed in the pessimistic zone for 42 consecutive months since December 2020, after the last presidential election.

Independents’ confidence has been in pessimistic territory for 50 months since April 2020, the month after the onset of the pandemic. In May, independents dropped 1.7 points, or 4.5%, and posted 36.3 on the Index.

Investor Confidence

Respondents are considered "investors" if they currently have at least $10,000 invested in the stock market, either personally or jointly with a spouse, either directly or through a retirement plan. 27% of respondents met this criterion, and 67% were classified as non-investors. We could not ascertain the status of 6% of respondents.

Optimism among investors slid 8.6 points or 15.7%, from 54.9 in April to 46.3 in May, while it improved by 3.5 points or 9.6% among non-investors, from 36.6 in April to 40.1 in May.

The economic optimism gap between investors and non-investors narrowed to 6.2 in May from 18.3 in April and 10.6 in March.


Comparing a measure's short-term average to its long-term average is one way to detect its underlying momentum. For example, if the 3-month average is higher than the 6-month average, the indicator is bullish. If the 6-month average exceeds the 12-month average, the same holds true.

In May, the Economic Optimism Index and its three components are lower than their respective three-month moving averages.

Also, in most cases, the three-month moving averages are equal to or close to their six-month moving averages. The data points to a potential slowdown.

Demographic Analysis

The number of groups in the positive zone indicates the breadth of optimism in American society. This month, two of the 21 demographic groups we track— age, income, education, race, etc.—are above 50.0, indicating optimism on the Economic Optimism Index. Starting with three groups in January 2023, we saw steady improvement, peaking at nine groups in April and then declining to one group in August. Since August, it has been in the range of one to six. In May, only two groups are in the positive zone.

Five of the 21 groups improved on the index, compared to six in April, 10 in March, and 10 in February.


The survey showed that 87% are worried about inflation. One-half (53%) are very concerned, and another 34% are somewhat concerned.

Americans continue to suffer because real wages have not increased, despite the CPI rate falling from a 40-year high of 9.1% in June 2022 to 3.5% in March 2024.

The Federal Reserve believes that long-run inflation of 2%, measured by the annual change in the price index for personal consumption expenditures, is most consistent with its maximum employment and price stability mandate.

We will cover inflation in greater detail upon the release of the CPI data next week.


Four in ten (45%) Americans believe we are in a recession, while 26% are unsure. 29% think we are not in a recession.

Further, nearly two-thirds (62%) think the U.S. economy is not improving, while 25% believe it is improving.

Fiscal Profligacy

Government spending has spiraled out of control, resulting in a national debt exceeding $34 trillion, which increases by $1 trillion every 100 days.

Most Americans are concerned about the sustainability of this trajectory. The high interest rates are also hurting Americans and sapping their confidence.

We anticipate a stagflationary economy in 2024. The risks on the downside outweigh those on the upside.

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