American Personal Finances: Peak Optimism

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American Personal Finances: Peak Optimism

No matter the political party, the incumbent US president typically wins reelection when the US economy is strong. When Americans feel financially secure they don’t usually change things up.

Regular readers know we try to stay as non-political as possible, but this is an important election year with implications for the US economy and stock market depending on who wins the White House. Yes, there are still many months until November but President Trump is in solid shape to start the year. The latest results to Gallup’s annual survey on how Americans feel about their personal finances shows record-high optimism:

Current Mood:

  • Almost six in ten Americans (59%) currently say they are better off financially than they were a year ago, an all-time high.

    Moreover, this marks a solid majority compared to last year when Americans felt more split at 50%. It also slightly beat the old record high of 58% in January 1999.
  • Why it is notable: at least half of Americans reported their financial situation was better than a year ago in surveys from 1998 to 2000, but the percentage was typically under 50% in most surveys from 2001 to 2018.

Looking Ahead:

  • Nearly three in four US adults (74%) forecast they will be better off financially next year, the highest level since Gallup started asking in 1977.

    The prior peak was 71% in 1998.

Political Party:

  • Unsurprisingly, most Republicans (76%) think they are financially better off today than they were a year ago. The majority (83%) also expect their personal financial situation to be better in a year’s time.
  • Also not shocking, fewer than half (43%) of Democrats say they are better off than a year ago. Most Democrats (60%) think their personal financial situation will be better in a year, however.
  • Most Independents believe they are better off now than a year ago (58%) and even more think they will be better off next year (76%).

Bottom line: based on historical patterns Americans are at peak economic optimism as we start 2020. This includes the majority of President Trump’s Republican base who expect their financial situation to keep improving. Even more key, the majority of Independents feel the same way. Since they usually swing the vote, this enthusiasm should bode well for Trump as long as the economy stays strong through early November.

Given that this poll was conducted from January 2nd to the 15th, it’s no surprise that Trump’s approval rating reached his best level as president at 49% last week in Gallup’s most-closely watched poll. That was not just due to higher ratings among Republicans, but Independents as well:

  • Trump’s approval rating among Republicans rose 6 percentage points to 94% from early January.
  • His approval rating also rose 5 points to 42% among Independents as of early this month, which “ties three other polls as his best among that group.”

The upshot: Trump garnered more approval from both his base (Republicans) and also Independents, despite that this latest poll was taken during the Senate impeachment trial and before he was acquitted. Here is a brief list of some other reasons Gallup gave:

  • The US military killing a leading Iranian military general.
  • Trump replaced the US-Mexico-Canada trade deal with NAFTA.
  • American confidence in the economy “is higher than at any point in the past two decades” and national satisfaction “is the highest in nearly 15 years”.
  • 63% of “Americans now approve of the way Trump is handling the economy… the highest economic approval rating… for any president since George W. Bush” after the 9/11 terrorist attacks.

Our take: we attribute President Trump’s high approval rating to the last two bullets, both related to a strong economy. As long as his approval ratings stay at current levels or rise further, we believe financial markets will increasingly price in a win for him in November.

One closing thought: you must have noticed that both of Gallup’s consumer finance surveys peaked in 1999 and current readings are similar to those. Keeping confidence this high for 9 more months will not be a layup.