What's going on?

According to an influential survey released on Friday, Americans are more confident about the current economic situation than at any point since 2005!

What does this mean?

Every month, the University of Michigan conducts a national survey of people�s confidence in the economy. Friday�s release showed that Americans� overall confidence in the economy (current conditions plus expectations for the future) hit an almost two-year high, very close to a level last seen more than a decade ago. The sub-measure of just the current economic situation was particularly good (the strongest since 2005). The reasons cited most often by people had to do with the expected positive impact of new government policies under a Trump administration.

Why should I care?

The bigger picture: Attitude can count for a lot.
In essence, the economy is just a collection of individuals making decisions in an effort to maximize their financial benefit � it therefore shouldn�t be surprising that emotion is an important driver of the economy. A more positive attitude can be a self-fulfilling prophecy: if people believe the economy is picking up steam, they are more likely to spend money and businesses are more likely to invest in the future (e.g. by hiring people or buying equipment). The confidence itself can become a growth driver.


For markets: Markets are reflecting much higher expectations � now those expectations need to be met.
US stock markets hit another record high on Friday. At the same time, the US dollar continued to increase in value versus most other currencies (remember, investors like to move money to countries where they think there will be improving economic growth). The Trump-inspired optimism has started to be significantly reflected in the value of investments. At some point, perhaps early in the new year, investors will start demanding tangible evidence that their optimism is justified (e.g. actual changes to regulations and the tax code as well as a targeted increase in near-term government spending).