Americans' confidence in the economy returned last week, according the latest survey from Gallup. The rise of the Dow Jones Industrial Average to record highs likely is one reason why confidence is brimming, based on past relationships between the stock benchmark and Gallup's U.S. Economic Confidence Index.
Of course, the benefits of a market surge aren't felt by all Americans, with more than one-third of U.S. stocks being owned by foreign interests. A little less than half of the country — 46 percent — owns stock, either through retirement accounts and other funds or directly.
Gallup's U.S. Economic Confidence Index climbed back into positive territory, averaging +4 for the week ending Oct. 22, only one week after the measure recorded the first negative score in 2017.
This boost may be short-lived, given what occurred after prior stock market records were hit. When the Dow Jones hit 21,000 in early March, economic confidence climbed to +16, but within three weeks it had fallen to +5. Likewise, the rise in economic confidence in August that accompanied the Dow Jones hitting 22,000 vanished quickly, with the measure back to its prior levels within four weeks.
Gallup's U.S. Economic Confidence Index is the average of two components: how Americans rate current economic conditions and whether they feel the economy is improving or getting worse. The index has a theoretical maximum of +100 if all Americans were to say the economy is doing well and improving, and a theoretical minimum of -100 if all were to say the economy is doing poorly and getting worse.
Gallup's U.S. Economic Confidence Index has been negative for most of the time since tracking began in 2008. However, 2017 bucked that trend, and two weeks ago the score fell into negative territory for the first time this year with a weekly average of -1, perhaps in response to a Bureau of Labor Statistics report that the economy lost 33,000 jobs in September.
Last week's jump in confidence was also the index's best one-week improvement since the first week of August, when the index also rose five points. The only other week in 2017 where Gallup's U.S. Economic Confidence Index improved by a similar or better margin occurred in early March, when confidence rose seven points to a nine-year high of +16.
Notably, the Dow Jones industrial average hit record highs on all three of the weeks that economic confidence registered larger-than-usual improvements this year. The latest milestone was crossed this past Tuesday, when the Dow Jones closed above 23,000 for the first time, after surpassing the 22,000 mark Aug. 2 and the 21,000 level on March 1.
© 2023 Newsmax Finance. All rights reserved.