Consumer expectations for stock gains collapse
A much smaller share of consumers think stocks will rise over the next year following the recent market correction.
The S&P 500 meandered to a modest gain on Tuesday, leaving the blue chips about 6% beneath the all-time high reached in February. After all the Sturm und Drang of the last month, that doesn’t sound so horrible.
But the suddenness of the downturn that sent the S&P 500 into a 10% tumble between February 19 and March 13 seems to have significantly shifted the public’s view on whether the first year of Trump 2.0 will be a walk in the park for stocks.
The Conference Board’s Consumer Confidence report released Tuesday morning was generally pretty dour, showing a worse-than-expected decline in consumer confidence that notched its fourth straight monthly drop.
But for US equity market geeks, the section on expectations for the stock market seems particularly noteworthy. The share of respondents saying they expected stock prices to rise over the next 12 months plunged from 46.7% in February to 37.4% in March. That’s the lowest since November 2023, and stands in stark contrast to the all-time high levels that this measure reached in November 2024, right after President Trump triumphed in the election.
Of course, this is a survey of consumers, not market aficionados, and by definition it’s a lagging indicator reflecting the action in the market and the headlines those market moves generate, rather than an especially well-informed view on the direction of equity prices. That goes for previous months as well, with the all-time high expectations for stock increases in late last year now looking far too optimistic.
Still, it still seems worth highlighting this sharp shift in expectations from the general public after the correction, as it could make it tougher for market sentiment to return to the levels of market euphoria we seemed to be hitting in the first month of the administration. While tough to quantify, it stands to reason that such ebullience played a role in the surge of seemingly insanely valued, often Trump-related momentum stocks — Palantir and Tesla foremost among them — that led the postelection rally that drove the S&P to a record high little over a month ago.
