The IBD/TIPP Economic Optimism Index vaulted 5.4 points to 55.7 in early March, the biggest one-month jump since 2012. As the Dow Jones and broader stock market rally extended their recovery and the government shutdown receded further into memory, Americans' confidence in the economy jolted out of a four-month tailspin to solidly optimistic territory. Readings above the neutral 50 level reflect optimism.
The IBD/TIPP Poll reflects 907 responses from Feb. 21 to March 2. The survey period for the prior IBD/TIPP Poll in February, which saw economic optimism slide to a 16-month low, began just before President Donald Trump declared an end to the record 35-day government shutdown on Jan. 25 and finished just after the January jobs report showing the U.S. added 304,000 jobs in the month.
Economic optimism at the start of March seemed to finally catch up to the Dow Jones and broader stock market rally that began just after Christmas. Views of the economy were colored by stock portfolios. Among self-described investors, economic optimism surged to 59.2 from 52.3. That's the best level since October, when the stock market correction began. Among non-investors, the index ticked up to 49.7 from 48.6, remaining slightly pessimistic.
Economic Optimism Reverses Slide On Elections, Stock Market, Government Shutdown
The IBD/TIPP Economic Optimism Index backtracked after hitting a 14-year high of 58 in August, having ridden an economic surge courtesy of the Trump tax cuts and federal spending stimulus. Most of the damage to economic optimism came after the November elections that saw a return of divided government, leading to the government shutdown. The stock market sold off sharply in the fourth quarter, but after two strong months, the Dow Jones and S&P 500 are within 5% of prior highs.
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 jumped 7.1 points to 51.6. That's after falling in February to the lowest since September 2016. Still, the subindex remains well off the 13-year high of 57.5 in February 2018 on the heels of tax cuts.
The six-month personal financial outlook index rose 2.6 points to 62.6. The October reading of 66.7, coming as the Dow Jones hit a record high just below 27,000, was an all-time best for the IBD/TIPP Poll, which dates back to 2001.
Meanwhile, the measure of confidence in federal economic policies bounced 6.6 points to 52.9 after the government shutdown ended. Trump has declared a national emergency to get funding for a border wall with Mexico, but that isn't affecting government workers or services. The gauge hit a 13-year high of 53.7 in November.
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