1/6 The preliminary November University of Michigan Consumer...
Jim Bianco@biancoresearch
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Nov 09, 2025
~2 min read
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1
1/6
The preliminary November University of Michigan Consumer Sentiment Survey was released this morning (blue). The "current conditions" measure of this survey set a new ALL-TIME LOW.
Before 2020 (COVID), the stock market (red) was the primary driver of the public's economic outlook. These two series moved up and down together. Since COVID, this relationship has completely disconnected.
This leads to some uncomfortable explanations.
Half of the country owns no assets and lives paycheck to paycheck. Have they now moved to being angry at a booming stock market that worsens inequality? Is this why socialists are getting elected? Do they want their agenda to knock the market down? Is a bear market now the goal, not the concern?
The preliminary November University of Michigan Consumer Sentiment Survey was released this morning (blue). The "current conditions" measure of this survey set a new ALL-TIME LOW.
Before 2020 (COVID), the stock market (red) was the primary driver of the public's economic outlook. These two series moved up and down together. Since COVID, this relationship has completely disconnected.
This leads to some uncomfortable explanations.
Half of the country owns no assets and lives paycheck to paycheck. Have they now moved to being angry at a booming stock market that worsens inequality? Is this why socialists are getting elected? Do they want their agenda to knock the market down? Is a bear market now the goal, not the concern?
2
2/6
Why the anger?
Since the COVID recession ended in April 2020, cumulative price increases (orange) have outpaced cumulative wage increases (blue).
This devastates the bottom 50% of wage earners (and especially the bottom 30%) who own no assets and live paycheck-to-paycheck. They are having to do with less.
Why the anger?
Since the COVID recession ended in April 2020, cumulative price increases (orange) have outpaced cumulative wage increases (blue).
This devastates the bottom 50% of wage earners (and especially the bottom 30%) who own no assets and live paycheck-to-paycheck. They are having to do with less.
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3/6
For comparison, the opposite happened in the 2010s. The cumulative gain in wages (blue) beat the cumulative rise in prices (orange).
In this scenario, the bottom 50% of wage earners were able to make ends meet and maybe get a little ahead, as their paychecks bought a bit more each year.
For comparison, the opposite happened in the 2010s. The cumulative gain in wages (blue) beat the cumulative rise in prices (orange).
In this scenario, the bottom 50% of wage earners were able to make ends meet and maybe get a little ahead, as their paychecks bought a bit more each year.
4
4/6
Fed Chairman Jay Powell mouths the words "inflation expectations remain well anchored."
Yet, the narrative in Washington all week has been that "affordability" explains Tuesday's election results.
And the only explanation for the all-time low in current conditions is affordability. 4.4% unemployment does not explain it, given that 15% in 2020 did not produce readings this bad. 9% inflation in 2022 and the worst of the Great Recession in 2008 saw higher levels of current conditions.
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What explains this is that the CUMULATIVE GAINS in prices over the last five years have pushed the bottom 50% to the breaking point.
In other words, inflation is unanchored!!!
The public wants LOWER prices, NOT A REDUCTION IN THE RATE OF INCREASE. In other words, they want DEFLATION and are voting for politicians who might deliver it, and this wrecks the stock market ... so be it.
Rate cuts are inflaming the situation, they are pushing up stock prices when infaltion is still above 3% (core CPI). This is driving the public mad with anger when they don't have enough money to buy the entire grocery list.
The problem is affordability (cumulative infaltion), and 3% inflation FIVE YEARS after the shutdown should be viewed as a failure of monetary policy. Instead, the Fed is more worried about a few tenths of a percentage point rise in unemployment and concludes that the stock market needs more rocket fuel.
Fed Chairman Jay Powell mouths the words "inflation expectations remain well anchored."
Yet, the narrative in Washington all week has been that "affordability" explains Tuesday's election results.
And the only explanation for the all-time low in current conditions is affordability. 4.4% unemployment does not explain it, given that 15% in 2020 did not produce readings this bad. 9% inflation in 2022 and the worst of the Great Recession in 2008 saw higher levels of current conditions.
---
What explains this is that the CUMULATIVE GAINS in prices over the last five years have pushed the bottom 50% to the breaking point.
In other words, inflation is unanchored!!!
The public wants LOWER prices, NOT A REDUCTION IN THE RATE OF INCREASE. In other words, they want DEFLATION and are voting for politicians who might deliver it, and this wrecks the stock market ... so be it.
Rate cuts are inflaming the situation, they are pushing up stock prices when infaltion is still above 3% (core CPI). This is driving the public mad with anger when they don't have enough money to buy the entire grocery list.
The problem is affordability (cumulative infaltion), and 3% inflation FIVE YEARS after the shutdown should be viewed as a failure of monetary policy. Instead, the Fed is more worried about a few tenths of a percentage point rise in unemployment and concludes that the stock market needs more rocket fuel.
5
5/6
Fortunately, some at the Fed do "get it."
Fortunately, some at the Fed do "get it."
Jim Bianco@biancoresearch
Dear Jay Powell
The answer is in the room sitting right next to you.
Listen to her!
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*FED’S HAMMACK: ECONOMY SPLIT AS LOWER INCOMES STRUGGLE, SPENDING DRIVEN BY WEALTHIER AMERICANS
*HAMMACK: DON'T SEE ELEVATED INFLATION AS PURELY TRANSITORY
*FED'S HAMMACK SAYS INFLATION IS THE MORE PRESSING CONCERN
*HAMMACK: FED'S CURRENT RATE SETTING IS 'BARELY RESTRICTIVE'
The answer is in the room sitting right next to you.
Listen to her!
---
*FED’S HAMMACK: ECONOMY SPLIT AS LOWER INCOMES STRUGGLE, SPENDING DRIVEN BY WEALTHIER AMERICANS
*HAMMACK: DON'T SEE ELEVATED INFLATION AS PURELY TRANSITORY
*FED'S HAMMACK SAYS INFLATION IS THE MORE PRESSING CONCERN
*HAMMACK: FED'S CURRENT RATE SETTING IS 'BARELY RESTRICTIVE'
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6/6
And unfortunately, others do not.
And unfortunately, others do not.
Jim Bianco@biancoresearch
One of the most dangerous phrases in finance ...
"The market is wrong."
... was uttered by New York Fed President John Williams earlier today.
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Federal Reserve Bank of New York President John Williams said model estimates of the US neutral interest rate are lower than bond-market estimates, which he cautioned are unreliable.
“The bond market is suggesting much higher r-stars, but I would discount that and their impact on a bit because they’ve tended not to be reliable,” Williams said Thursday during an event organized by Goethe University in Frankfurt, Germany.
Economists often refer to the so-called neutral rate — where it should be when monetary policy isn’t fighting unemployment or inflation — as “r-star,” based on the mathematical notation used to represent it in economic models. Models currently estimate the neutral rate to be around 1%, Williams said.
"The market is wrong."
... was uttered by New York Fed President John Williams earlier today.
---
Federal Reserve Bank of New York President John Williams said model estimates of the US neutral interest rate are lower than bond-market estimates, which he cautioned are unreliable.
“The bond market is suggesting much higher r-stars, but I would discount that and their impact on a bit because they’ve tended not to be reliable,” Williams said Thursday during an event organized by Goethe University in Frankfurt, Germany.
Economists often refer to the so-called neutral rate — where it should be when monetary policy isn’t fighting unemployment or inflation — as “r-star,” based on the mathematical notation used to represent it in economic models. Models currently estimate the neutral rate to be around 1%, Williams said.
