Stock market up, Americans still driving and spending. So why do consumers hate this economy?

Sign o' the Times from the end of this week.

The gulf between US stocks and Americans’ spirits keeps widening.

The Dow on Friday hit a record high — the same day consumer sentiment hit an all-time low. Beyond pressures from the Iran war, which stock markets have largely shrugged off, AI is a factor in the divergence.

Traders are all-in on AI, but Americans are fretting over its impact on jobs. “The stock market on the moon and households in increasing gloom are reflecting on the same thing,” an economist said: Reduced labor costs may be good for stocks but mean fewer jobs.

The stock market's reaction is noticeably different from the peak inflation times of 2022, when stocks were heading down and growth in jobs and (nominal) wages was much stronger than today.

The odd part about the rock-bottom consumer sentiment is that it isn't translating into an overall recession. New unemployment claims remain at or near multi-decade lows, and even with gas being at similar price levels to the same time in 2022, gas usage stayed elevated through April in 2026, showing little change in habits.

Inflation-adjusted retail sales for the non-car based economy may have dropped in March from February's highs, but they stayed relatively stable in April, even with gas prices going even higher.

But UW-Madison professor Menzie Chinn may have landed on a reason why everyday Americans think the economy sucks so much despite the not-so-bad macro data and the bomming stock market. Professor Chinn found a recent New York Fed survey that indicates that if you're not in the investor class (aka - the bottom 3/4 of Americans by wealth and income), then it probably does feel like a recession, with spending by those groups falling by much more than with richer Americans.

This coming Thursday, we are scheduled to get data that not only reveals April's income and spending for the US economy, but also a revised look at 1st quarter GDP. That GDP report will also include the first look at corporate profits for Q1 2026, which includes the initial rise in gasoline prices.

I suspect we will see a combination of real declines in income combined with contunued increases in profit. It'll be even more evidence of a two-tiered economy that may be giving big gains to a few with the money to gamble with and self-invest, but done at the expense of the typical American who is living paycheck to paycheck, and now has to spend more to get the same things.