Americans are saying they’re feeling better about the economy than they have in years. This surge in consumer sentiment is significant and could have positive implications for President Biden’s administration. According to the University of Michigan’s latest consumer survey, Americans’ attitudes on the economy are substantially improving as inflation slows down. This is a promising turn of events, especially considering that for months, the economy has been much stronger than what political coverage and public polling have suggested. Americans are starting the new year with a good dose of optimism about the economy, their incomes, and the inflation outlook. This surge in consumer sentiment, which has seen a 29% increase since November, is the largest two-month rise in years. The University of Michigan Consumer Sentiment Index for January reached its highest level in two and a half years, reflecting a notable improvement in how Americans view the direction of the economy.

Implications for Biden’s Administration

The positive shift in consumer sentiment is good news for President Biden’s administration. It indicates that Americans are feeling more confident about the state of the economy, which could translate into increased support for the president’s economic policies. This surge in optimism is particularly timely as it coincides with a week of weakness in US Treasuries and core bonds. Furthermore, the University of Michigan Consumer Sentiment Index’s positive outcome for January may signal the end of what some had come to call the Goldilocks outcome. These developments provide the administration with an opportunity to leverage this improved sentiment to strengthen the economy further.

Increasing Optimism and Market Response

The surge in consumer sentiment is being reflected in US market performance as well. The Michigan consumer confidence boost has had a positive impact on US markets, even amidst uncertainty regarding inflation and the Federal Reserve’s rate cuts. Treasury yields finished mostly higher on Friday, with the policy-sensitive 2-year rate reaching a level not seen in four weeks. This market response reflects the growing optimism among consumers and their positive outlook for the economy. Retail stocks are also expected to benefit from this surge in consumer sentiment, with four retail stocks being identified as potential plays in light of this improvement.

Gold Prices and UofM Consumer Sentiment

Despite the positive movement in UofM consumer sentiment, gold prices are remaining range-bound. The rise in consumer sentiment, which has reached a level of 78.8, has not significantly impacted gold prices. However, this development reinforces the notion that Americans’ attitudes towards the economy are improving and that they have a positive outlook for the future.

Summary:

• Americans’ attitudes on the economy are substantially improving as inflation slows, according to the University of Michigan’s latest consumer survey.
• The surge in consumer sentiment, the largest two-month rise in years, reflects a notable improvement in how Americans view the direction of the economy.
• This positive shift in consumer sentiment could have positive implications for President Biden’s administration and his economic policies.
• The Michigan consumer confidence boost has had a positive impact on US markets, despite uncertainty regarding inflation and the Federal Reserve’s rate cuts.
• Treasury yields finished mostly higher, contributing to the positive market response.
• Retail stocks are expected to benefit from the surge in consumer sentiment, with four retail stocks identified as potential plays.
• Gold prices remain range-bound, suggesting that the rise in UofM consumer sentiment has yet to significantly impact gold prices.

Source: University of Michigan, WSJ, Kitco News