US consumer sentiment tumbled in November to near the lowest level on record, as the government shutdown weighed on the economic outlook and financial strains soured views on personal finances. See, US Consumer Sentiment Declines to Near-Lowest on Record:

The preliminary November sentiment index dropped 3.3 points to 50.3, just above a June 2022 reading of 50 that was the weakest in University of Michigan data back to 1978.

A measure of current economic conditions slumped 6.3 points to a record low of 52.3 as anxiety mounted about the impact of the government shutdown.

The decline in sentiment was evident across age, income, education levels and political affiliation; interviews for this release closed before Tuesday’s elections.

The headline reading was far below the lows posted in all recessions dating back to the early 1950s.

Current personal finances (below in red since 2009) and buying conditions for big-ticket items like houses, cars, and durable goods (in blue) were reported as the worst since mid-2022 and 2008, respectively, while the perceived chance of losing a job (in yellow) was the highest since the pandemic.
 

One key exception: thanks to a 12% rise in the S&P 500 since last December, along with rebounds in other risk markets, consumers in the top third of stock owners reported a 11% increase in sentiment (green line below vs non-stockholders in orange and all stockholders in black, since 2019). This is the group that has been holding up consumer spending, too. See, Feeling Great About the Economy? You Must Own Stocks.
 

The trouble is that this same group, which has seen the most significant increase in its investment portfolios, is now most exposed and vulnerable to the inevitable next episode of market weakness.

We saw this pattern (see above) when risk assets (stocks, credit, cryptocurrencies, commodities and precious metals) tumbled across the board in 2020, and again from December 2021 through November 2022 (red bars highlighted below).
 

In both incidents, the sentiment and outlook of financial asset owners soured sharply, see the November 2022 report, “Affluent Canadians Re-Evaluating Finances and Retirement Plans Amid Economic Concerns.“

Most high-net-worth (HNW) Canadians (defined as having $1M or more in investable assets) reported feeling more stressed about the impact a volatile economy will have on their wealth and lifestyle, according to a new study by IG Private Wealth Management (IGPWM), a division of IG Wealth Management.

…While three-quarters (74 per cent) work with a financial advisor, less than half (45 per cent) of those that do have a holistic financial plan that addresses all dimensions of their financial life.

Having our life savings ride asset bubbles up and down is an unstable, vulnerable way to live, especially as we near and enter retirement. It also makes the economy more prone to crashes.

The latest market rebound has convinced many that the business cycle has been repealed and financial markets can thrive independent of the real world. Periods of disconnect are common, but permanent indifference would be unprecedented.

Wall Street has been called a casino with better lighting; unfortunately, those seeking investment advice mostly find ‘experts’ who act more like bookies than fiduciary advisers. Individuals need to consider the game and odds they wish to play.

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