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Lower-Income Americans Increasingly Worried About the Economy Despite a steadily growing economy and low unemployment easing some of the pain of high inflation, middle- and low-income Americans are feeling more stress. Recent evidence includes a drop in the consumer sentiment index in June to a seven-month low, primarily due to rising anxiety among middle- and lower-income Americans. This widening gap in economic perception is not surprising. Wealthier households have larger financial cushions and benefit from a surging stock market that boosts their wealth. In contrast, lower-income Americans have largely depleted their pandemic-era savings and must now rely on their job earnings to keep up with rising prices. Persistent high inflation and interest rates are straining their budgets, leading to increased credit card usage and more loan defaults. One positive development is the significant income growth in recent years. A tight labor market has forced businesses to pay more, and job switchers have received substantial raises. A recent Congressional Budget Office (CBO) report found that incomes have slightly outpaced inflation since 2019. As a result, most families spend a smaller portion of their income on essentials. However, these benefits are unevenly distributed. The highest earners spent 6.3% less of their income on goods and services in 2023 than in 2019, while the lowest earners spent only 2% less. This disparity explains why the wealthy are less worried about inflation. Moreover, lower-income households face higher price increases for their typical purchases compared to wealthier people, and their wages have not risen as quickly. What does the growing lack of confidence among many Americans mean for the economy? Nationwide financial market economist Oren Klachin noted that middle- and lower-income people spend most of their earnings on consumer goods and services. If they reduce spending, it could disrupt the economy. “This will be an important dynamic to watch in the second half of this year,” he said. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

The S&P 500 has set 29 new records in 2024, peaking again on Thursday. However, lower futures on Friday suggest it may not reach 30 records in this session. Optimism about potential interest rate cuts and excitement over AI have driven this bull run. However, caution is advised. The Nasdaq 100’s 14-day relative strength index has surged to 77.5, surpassing the overbought threshold of 70. Additionally, the market is increasingly reliant on a small number of big-cap stocks, which are significantly more expensive than their small-cap counterparts. Doug Kass, founder of Seabreeze Partners Management, lists several concerns. He believes corporate profit expectations are “unrealistic” and notes that stocks are overvalued relative to Treasury yields. Kass also points to underestimated political risks, overly bullish investor sentiment, and potentially toxic market structures and investor positioning. Ian Culley, investment analyst at All Star Charts, highlights recent market volatility as evidence of ongoing instability. He suggests monitoring high-yield bonds for insights into investor sentiment. According to Culley, the performance of the iShares iBoxx $ High Yield Corporate Bond ETF compared to the Invesco S&P 500 High Beta ETF and the Invesco S&P 500 Low Volatility ETF provides a clear indication of risk appetite. “When investors feel comfortable buying high-risk bonds, riskier stocks with a higher beta outperform safer alternatives,” Culley explains. He adds that a breakout of the HYG above 78 would confirm a risk-on stock market rally. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

A fascinating dynamic is unfolding in the U.S. bond and stock markets, which remain calm despite recent fluctuations in Treasury yields. In the past two weeks, U.S. government debt rates have seen significant volatility. At the end of May, rates surged to one-month highs due to expectations that the Federal Reserve would not cut interest rates soon, unsettling the stock market. Then, last Thursday, rates dropped to their lowest levels since late March, driven by renewed concerns about a U.S. economic slowdown, marking the longest stretch of declines in a year. Despite these swings, overall market volatility has stayed low. This is reflected in both the ICE BofAML MOVE Index, which measures expected interest-rate volatility in the Treasury market, and the CBOE Volatility Index (VIX), which tracks expected volatility in the U.S. stock market and has barely moved this year. The MOVE Index has also decreased from its early 2023 peaks, a period when the Federal Reserve was still raising interest rates. “In 2022 and into 2023, there was significant volatility in the Treasury market as investors tried to anticipate the Fed’s actions,” said Van Hesser, chief strategist for Kroll Bond Rating Agency. “Uncertainty around the economy’s strength and the necessary interest rates to control inflation contributed to this volatility.” Hesser noted that as it became clearer that inflation was easing and the economy was heading towards a soft landing, volatility diminished. This relative calm persisted on Tuesday, ahead of the consumer-price index release for May and the Federal Reserve’s policy update. Treasury yields for the 2-year, 10-year, and 30-year bonds fell after a solid $39 billion 10-year auction, while U.S. stocks closed mostly higher. “Corporate earnings growth is positive, consumer spending remains robust, and investors are optimistic about economic growth,” Hesser said. “The key question now is the future outlook. Despite ongoing uncertainty, improved visibility has dampened bond market volatility.” DataTrek Research co-founders Nicholas Colas and Jessica Rabe highlighted the historical price action at the long end of the U.S. government-debt yield curve, examining the 100-day standard deviation of daily returns for the iShares 20+ Year Treasury Bond ETF (TLT) from 2003 to the present. They noted that bond-market volatility typically increases significantly only during crises, which benefits bondholders. “Current 20+ Year Treasury volatility is running at its long-term average,” Colas and Rabe wrote. “This indicates that yields are likely to remain stable until macroeconomic conditions change.” Owning long-term Treasurys is seen as a contrarian trade that may require considerable patience before it pays off, according to Colas and Rabe. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com