US stocks remain high, but Americans are increasingly anxious: Consumer confidence falls to a five-month low, inflation expectations rise for the second consecutive month

U.S. consumer confidence further weakened under persistent inflationary pressure, while inflation expectations rose in tandem, widening the gap between Wall Street and the general public’s economic sentiment to a historic extreme.

The final reading of the University of Michigan’s October Consumer Sentiment Index came in at 48, slipping slightly from September’s 48.1 and touching a five-month low. Nevertheless, this final figure remained above the preliminary reading and exceeded the expectations of all economists surveyed by Bloomberg.

Consumers’ inflation expectations for the next year rose to 4.7% from last month’s 4.6%. Expectations for long-term inflation (five to ten years from now) rose to 3.5% from 3.4%. Both indicators reached their highest levels since May and both climbed for the second consecutive month.

University of Michigan Survey Director Joanne Hsu stated, “After five years of inflation running above target levels, both short- and long-term inflation expectations have trended upward in recent months, introducing the risk of inflation expectations becoming entrenched.”

Meanwhile, the S&P 500 Total Return Index has surged to historical highs, while consumer confidence hovers near historic lows, creating a rarely seen divergence between the two.

The survey shows that, for the fourth consecutive month, an increasing number of consumers have voluntarily mentioned that high prices are dragging down their personal finances—56% in October, up significantly from 45% in January.

This trend is seen across all political affiliations, with the largest increase among Republican voters. In contrast, the wealthiest consumer group has seen little change in their perception of the burden of high prices since January.

Gasoline prices are a primary source of inflation concern—more than 40% of respondents mentioned gas prices unprompted, with pump prices continuing to stay above $4 per gallon.

Hsu pointed out, “Consumers of all political leanings unanimously believe that inflation poses a much greater risk to the economy in the next year than unemployment.”

Politically, confidence among Democratic and Republican voters saw slight increases in October, but confidence among independent voters declined for the third straight month. The Index of Consumer Expectations recorded its first improvement since July.

The most striking structural divergence now may not stem from the data itself, but from the stark contrast between the market and the public. The S&P 500 Total Return Index has climbed to all-time highs, while the University of Michigan’s Consumer Sentiment Index hovers near record lows—with the current conditions subindex dropping to 44.7, its second lowest level ever.

Consumer confidence has declined by about 10% from a year earlier and about 15% from its peak in February. This divergence reflects two sharply contrasting economic narratives:

The stock market is driven by corporate profit growth, the concentration effect of tech stocks, and investor optimism; meanwhile, ordinary households are mired in the difficulties of high prices, high borrowing costs, and eroding purchasing power. Historically, such extreme divergence between the stock market and consumer confidence has been rare.