A dealer works because the Dow Jones Industrial Common surpasses the 50,000 mark on the ground on the New York Inventory Alternate (NYSE) in New York Metropolis, U.S., Feb. 6, 2026.
Brendan McDermid | Reuters
There is a disconnect between the inventory market and client optimism — and a few economists say affordability is a primary culprit.
During the last 4 to 5 years, the inventory market has change into divorced from client sentiment: Inventory valuations have soared whereas client optimism has plunged to near-record lows, economists stated.
The dynamic is atypical, stated Joe Seydl, a senior markets economist at J.P. Morgan Personal Financial institution.
Previous to 2022, inventory markets and client sentiment largely moved in sync, shifting up and down primarily based on prevailing financial situations, Seydl stated, primarily based on an analysis of data dating to the early 1990s. When instances have been good, each moved upwards in tandem, and vice versa.
“It actually breaks the 25-year relationship between the 2 sequence,” Seydl stated.
A separate evaluation by Oxford Economics discovered an analogous dynamic.
The College of Michigan’s client sentiment index ought to have ended 2025 at a worth of 93, primarily based on indicators like inventory costs, unemployment and inflation, in line with that Oxford Economics research, printed Jan. 27. As an alternative, it was 40 factors decrease, close to an all-time low.
“Traditionally, family perceptions of the economic system carefully tracked key macroeconomic indicators,” in line with Oxford Economics. “In the present day, these indicators recommend customers ought to be feeling considerably extra upbeat than they do.”
Impacts of the ‘vibecession’
Measuring how customers really feel — and the way that sentiment pertains to the inventory market and broad economic system — is necessary since client spending accounts for the majority of U.S. financial output, stated John Canavan, lead analyst at Oxford Economics.
The so-called “vibecession” — or the bitter temper — amongst customers is probably going on account of their views on affordability, Seydl stated.
“Affordability is kind of this catch-all time period for widespread dissatisfaction by customers of present financial outcomes,” Seydl stated.
The dynamic might have repercussions for the general economic system, the result of upcoming midterms in November and insurance policies pursued by lawmakers forward of these elections, analysts stated.
“Affordability was necessary within the 2024 election,” Seydl stated. “The factor that helped [Republicans] accomplish that effectively [in that election] is now a possible vulnerability as we head into the 2026 midterm elections.”
“The [Trump] administration is hyper-focused on this,” he stated.
Why affordability is a priority
There are numerous elements driving the eroded sense of financial well-being, economists stated.
Amongst them are larger costs, housing affordability and a cooldown within the job market.
General costs are ‘sharply larger’
Whereas inflation has throttled back, the general worth stage for U.S. items and providers is far larger than it was earlier than the Covid-19 pandemic, Seydl stated.
Common client costs increased by about 26% from December 2019 to December 2025, in line with knowledge from the Bureau of Labor Statistics.
“Costs are sharply larger than they have been 5 years in the past,” Canavan stated. “It is nonetheless very uncomfortable for many customers to have a look at costs right this moment, even when inflation — or the speed of worth progress — has slowed significantly.”
Homeownership prices
Homeownership prices have additionally soared, Seydl stated.
Common charges for a 30-year fixed-rate mortgage have been simply over 6% as of Feb. 5.
Whereas they’ve declined from a high of about 8% in 2023, they’re nonetheless significantly larger than earlier than the Covid-19 pandemic; certainly, you’d have to return to across the time of the 2008 monetary disaster, when the housing bubble burst, to see charges north of 6%.
The everyday household spends about 38% of their income on housing to cowl the mortgage on the standard new house, in line with a February 2025 evaluation by the Nationwide Affiliation of Realtors.
In the meantime, the U.S. Division of Housing and City Growth considers a house to be “reasonably priced” if month-to-month funds do not exceed roughly a 3rd of the family’s gross earnings.
A frozen labor market
Moreover, many customers really feel shut out of the present “low-hire, low-fire” labor market, Seydl stated.
Hiring has stalled out at one of its lowest levels in additional than a decade. Layoffs are additionally at traditionally low ranges, in line with federal knowledge dating back to the early 2000s, creating few open roles for job seekers and new entrants to the labor market.
Jobholders may additionally really feel much less flexibility within the office, Seydl stated. Employers have regularly known as staff again to in-person work and stripped away pandemic-era hybrid and distant work alternatives, fueling the sense of a worse work-life stability, he stated.
Synthetic intelligence and expertise
So, what’s been propping up the inventory market and economic system amid such a bitter temper?
Synthetic intelligence and expertise are an enormous purpose, economists stated.
The inventory market has been propelled larger largely because of the shares of a handful of mega-cap expertise firms — the so-called Magnificent Seven, Canavan stated. These firms embody Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla.
With some exceptions like Amazon, these firms do not rely closely on client spending, that means client sentiment and spending have not pushed their surging share costs, he stated.
Corporations have additionally spent closely to construct knowledge facilities that underpin their AI progress, Seydl stated.
That funding has helped propel U.S. financial progress in recent times however will not create many roles — or elevate incomes, by extension — relative to extra labor-intensive sectors like leisure and hospitality, schooling and well being care, for instance, he stated.
Okay-shaped economic system
Excessive-income households have been propping up the inventory market and broader economic system, economists stated.
For instance, customers within the high 10% of the earnings distribution accounted for more than 49% of consumer spending within the second quarter of 2025, the best stage since knowledge began being compiled in 1989, in line with Mark Zandi at Moody’s Analytics.
The Federal Reserve Financial institution of Dallas discovered an analogous pattern: Shopper spending among the many high 20% of households by earnings is up 4 percentage points over the last three decades, to 57%, it discovered.
The emergence of this so-called “K-shaped” growth — whereby spending will increase for these on the high however falls for these on the backside — might pose financial dangers, in line with the Dallas Fed evaluation.
That is as a result of sustaining spending ranges among the many rich seemingly depends upon the inventory market remaining robust, Canavan stated.
Shares are disproportionately owned by high-income and wealthy households. Their spending is guided by a so-called wealth impact, whereby they spend extra freely as a result of their sizable inventory earnings in recent times cause them to really feel wealthy, Canavan stated.
Nevertheless, there is a query as to how lengthy that may final, he stated.
“It partly depends upon how lengthy the fairness positive aspects can proceed,” Canavan stated.
