Wall Street’s bullish stocks view contrasts with consumer gloom

Trader Terrance McCauley, left, and specialist Anthony Matesic confer on the floor of the New York Stock Exchange on April 20, 2026. Photo by AP Photo/Richard Drew

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U.S. stocks are trading near a record high, signaling Wall Street is learning to cope with lingering geopolitical risks. Main Street, however, is struggling to catch up.

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Consumer sentiment is languishing at all-time lows, with Americans increasingly worried about mounting inflation driven by hostilities in the Middle East. Earlier this month, a preliminary read on the University of Michigan’s consumer sentiment index for April slumped to a record-low 47.6, down from 53.3 in March. The final figures will be released on Friday.

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Strong corporate earnings, the revival of the artificial intelligence trade and an otherwise resilient economy have buoyed the stock market even as Americans’ outlook has started to sour. Chief among consumers’ concerns are prices at the gas pump as the closure of the Strait of Hormuz drives up costs.

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The divide has reached a critical juncture where investors need to question how much further sentiment can worsen before it starts to erode the S&P 500 index’s earnings power.

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“The consumer remains the bedrock of the U.S. economy, so any deterioration there is ultimately a risk to equities,” said Noah Weisberger, chief U.S. equity strategist at BCA Research.

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The United States is in a “slowing-but-still-growing” phase, where it’s not a clear recession and reacceleration is still possible, according to Weisberger.

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“The market is being supported by resilient earnings and investment-led growth, especially AI- and capex-related spending, while consumers are still contending with a lukewarm labour market and, at least in terms of confidence if not yet spending, higher gasoline prices and headline inflation,” said Weisberger. “Weak confidence also predates the Iran conflict, so this is not purely an oil story.”

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Meanwhile, a separate survey from the U.S. Federal Reserve Bank of New York indicated consumers’ views on their financial situation was deteriorating with more than a quarter of households — the highest proportion since last May — expecting to be worse off.

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“The K-shaped recovery continues to divide consumers of different income and spending levels,” said Brent Ciliano, chief investment officer at First Citizens Bank. Ciliano added that higher-income consumers are benefiting from broad financial asset appreciation while those on lower incomes struggle to keep pace with inflation.

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Yet Wall Street continues to pile into the stock market ignoring the early warning signs. The S&P 500 gained 0.7 per cent at 9:42 a.m. on Wednesday, gaining for the sixth time in eight trading days. To Chris Zaccarelli, chief investment officer at Northlight Asset Management, the stock market moves on corporate profits rather than surveys.

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“Even if consumers express their unhappiness with the current state of affairs, but have the wherewithal to keep spending, then corporate profits will keep rising and the stock market will rise along with it,” Zaccarelli said.