2008 record      

 

The IBD/TIPP Economic Optimism Index hit a 10-month high in January, as low interest rates and a China trade deal lifted the Dow Jones and broader stock market to new record highs. All the good news for the Trump economy boosted support for federal economic policies to a 16-year high.

The Economic Optimism Index rose for the fourth straight month, gaining four-tenths of a point to 57.4. That's not far off the 15-year high of 58.0 touched in May, just before President Trump blew up the first China trade war cease-fire. Readings above the neutral 50 level reflect optimism.

There was one dissonant note in the cheerful outlook. The gauge of the six-month economic outlook dipped 1.9 points to a slightly optimistic 51.1.

Economic Optimism Index Components

The IBD/TIPP Economic Optimism Index is a composite of three major subindexes. They track views of near-term economic prospects, the outlook for personal finances, and views of how well government economic policies are working.

The six-month outlook gauge for the economy is up 8.1 points since September, but remains 6.4 points below the 13-year high of 57.5 in February 2018 that came on the heels of tax cuts. The index registered a low of 32.1 in December 2007 as the economy entered recession.

The personal finances subindex rose 1.5 points to 64.6, which is strongly optimistic. The index launched in 2001 and hit a record 66.7 in October 2018 before financial markets hit turbulence late last year.

The federal policies subindex rose 1.4 points to 56.4. That's the highest since April 2003.

Fed-Fueled Trump Economy?

How is it that optimism about the near-term outlook is minimal, while views of personal finances have reached a cruising altitude? The Fed's dovish fingerprints are all over the latest IBD/TIPP Poll results.

Last year's big gains for the Dow Jones and broader stock market came as earnings flatlined but valuations rose on the lower interest-rate outlook. While low interest rates also are helping consumer balance sheets, there's a clear split in how investors and noninvestors feel about the Trump economy.

Among investors, overall Economic Optimism rose to 60.0 in January vs. 53.2 for noninvestors. Likewise, support for federal economic policies is much higher among investors (60.8) than noninvestors (49.4).

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