Send a Tweet
Most Popular Choices
Share on Facebook 13 Share on Twitter Printer Friendly Page More Sharing
OpEdNews Op Eds    H3'ed 3/17/10

Behind the Sentiment Disparity: Main Street vs. Wall Street

By       (Page 1 of 3 pages)   1 comment

By Dian L. Chu, Economic Forecasts & Opinions

According to a gauge derived from data compiled by The American Association of Individual Investors (AAII), bullishness on U.S. stocks is beginning to emerge after the market's rally in the past year.

The latest AAII Sentiment Survey reading shows optimists outweighed pessimists for the first time since January 2008, three months after the previous bull market ended. (See Chartfrom Bloomberg)

A Disparity in Sentiment

In contrast to the cheery mood of the markets, the latest readings from consumers and small business owners indicate economic sentiment isn't improving, despite signs of a factory rebound and less gloom on the labor front.

The National Federation of Independent Business said its optimism index for small business owners fell back in February to its December reading. The IBD/TIPP Economic Optimism Index dropped 3% in March, well below its average of the past year.

Meanwhile, The U.S. consumer sentiment also dipped in early March, according to the University of Michigan Consumer Sentiment Index.

'Never Seen Anything Like It'

This divergence has got the Wall Street scratching its collective head. In a recent MarketWatch article, Mr. Mark Hulbert cited a Wall Street advisoras saying:
"The disparity between hope on Wall Street and malaise on Main Street continues. I have never seen anything like it."
In short, the disparity may be deciphered in one word liquidity which Wall Street has plenty of from government handouts, while main street remains strapped from the bleak prospects in both the job and housing markets.

Behind The Productivity and Profit Gain

Corporations are now seeing higher profits mainly through cost, inventory, and workforce reductions. It is not a coincidence that the U.S. productivity rose by an outsized 6.9% last quarter, while the cash U.S. corporations have on hand equals about one-tenth of the annualized gross domestic product (GDP) over the past twelvemonths -- near a record high, according to an IHS analysis of Commerce Department data.

This type of "growth" is not real and entirely unsustainable, and at some point, companies won't be able to get their employees to keep producing more.

For Middle America, the stagnant housing market and the lack of positive job growth are two factors hindering a more robust reading for consumer sentiment. An analysis of these two factors will offer some clues to Wall Street as to what Main Street is concerned about regarding the economy.

Home Not So Sweet Home

In the fourth quarter, national home prices fell 1.1% compared with the third quarter, according to Standard & Poor's. Meanwhile, nearly one in four of all Americans with a mortgage - more than 11.3 million homeowners - are underwater.

Next Page  1  |  2  |  3

(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).

Rate It | View Ratings

Dian Chu Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

Dian L. Chu, M.B.A., C.P.M. and Chartered Economist, is a market analyst and financial writer regularly contributing to several leading investment websites. Ms. Chu's work is also syndicated to media outlets worldwide. She blogs at Economic (more...)
Go To Commenting
The views expressed herein are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.
Writers Guidelines

Contact AuthorContact Author Contact EditorContact Editor Author PageView Authors' Articles
Support OpEdNews

OpEdNews depends upon can't survive without your help.

If you value this article and the work of OpEdNews, please either Donate or Purchase a premium membership.

If you've enjoyed this, sign up for our daily or weekly newsletter to get lots of great progressive content.
Daily Weekly     OpEd News Newsletter
   (Opens new browser window)

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Chinese Yuan v The U.S. Dollar: In The Case of Global Reserve Currency

Plausible: Sovereign Default On A Global Scale

Crude Oil Breaks The Dollar Rule For The Summer High Noon

Sex Selection and Trade Surplus in China

Behind the Sentiment Disparity: Main Street vs. Wall Street

Sovereign Risk and the Price of Oil

To View Comments or Join the Conversation:

Tell A Friend