By Jason Collins
Editor’s note: The opinions expressed here are those of the authors. View more opinions on ScoonTV
For a long time, market performance has been considered a reliable reflection of economic health, but that reliability has been called into question of late. We’ve been seeing the stock market hit new highs as it rallies, while the average consumer is fighting rising prices and historic layoffs.
Republican and Democratic presidents rotating through the Oval Office have routinely used the stock market as an indicator of how well the economy is going for Americans, even though the majority of Americans don’t own stocks and realize little to no financial gains from them.
With an October report revealing 150,000 job losses, are the market highs a true sign of economic strength, or is it merely a case of smoke and mirrors?
A Growing Disconnect Between Wall Street and Main Street
Investor sentiment is high as the markets continue to rally, but this jubilation isn’t quite the same for the average consumer. While stock markets reflect corporate profitability and investor confidence, they do not accurately reflect workers’ lived experience. More than ever, we are seeing a chasm between those benefiting from the market and those who aren’t.
If we look back in history, we can see a pattern emerging. When unemployment starts rising, the stock market also tends to continue climbing. For example, in August, the unemployment rate grew 4% according to the Bureau of Labor Statistics, but the S&P 500 remained at record highs. Wall Street optimism doesn’t lend itself to Main Street.
Often, these market rises are a result of large corporations benefiting from cost-cutting and automation. This impacts consumers by eroding household purchasing power as the costs of groceries, fuel, and housing rise.
For example, the S&P 500 has rallied 36% in just over six months, driven by strong corporate earnings, enthusiasm over AI, and potential Fed rate cuts. According to Reuters, the chief investment officer for American Century Investments, Victor Zhang, insists the rallying markets are a sign of economic strength. Zhang explained,
“When you look at the fundamentals in the economy around the world, the U.S., emerging markets are experiencing strong growth and while there is some weakness that is at a healthy level.”
But at the same time, consumers are having to cope with rising costs of food. According to CNN, average US grocery prices in September were 1.4% higher than in January. Between July and August, the country experienced the biggest month-to-month jump in three years!
President Donald Trump continues to claim that food prices have dropped under his term, but Michigan State University professor David Ortega proves this to be false.
“The reality is that prices for many everyday grocery items have increased in recent months, and tariff-related cost increases are now feeding through to consumers.”
For example, the price of meats like poultry, fish, and eggs has increased by 4.5%. According to a report from the National Association of Realtors, shares of first-time home buyers have dropped to an all-time low of 21% as a result of unaffordable housing.
Inflation and the Illusion of Growth
When considering whether the stock market rallies are a sign of economic strength, it’s worth noting that inflation can distort these perceptions. This is known as an “inflation illusion.” Without getting too technical, nominal rising figures like profit mask a decline in household purchasing power and overall living standards.
In fact, it’s pretty common for companies to report higher revenues due to increased prices rather than actual growth. Investors interpret these numbers as signs of expansion, and stock values are inflated. You can see now why this is more of an illusion of growth.
The Reality Check
While stock markets and investor sentiment are currently high, reality is bound to catch up. That wake-up call will come in the form of job losses, which will reduce disposable income, lowering spending power that will eventually affect corporate earnings.
In October, the country experienced the largest wave of layoffs in more than 20 years. According to a report from Challenger, Gray & Christmas, more than 150,000 jobs were cut in October. The report revealed that technology companies shed the most jobs, followed by the retail sector.
Andy Challenger, chief revenue officer for Challenger, Gray & Christmas, said in a statement, “Some industries are correcting after the hiring boom of the pandemic, but this comes as AI adoption, softening consumer and corporate spending, and rising costs drive belt-tightening and hiring freezes.”
He added, “Those laid off now are finding it harder to quickly secure new roles, which could further loosen the labor market.”
Job cuts this year have increased by a whopping 65% since last year. So, if fewer people are working, who’s really fueling this market optimism?
Why The Market Keeps Rising and What It Means
Understanding investor psychology can help answer who’s fueling market optimism. Stock prices are driven by forward-looking expectations rather than present data, which is why stocks are rising while the outlook for the average consumer looks bleak. There’s a temporary disconnect between the markets and the average Joe.
Another factor fueling this investor excitement is hype surrounding AI innovations and other exciting tech developments, despite being a direct cause of numerous job cuts. The Challenger, Gray & Christmas report revealed that companies cited AI as a reason for cutting 31,039 jobs in October. So, while corporations may be reporting higher profits, it’s not necessarily from real growth but from using cost-cutting tools for efficiency, like AI.
Looking at just the rising stock markets is not enough to determine whether the country is experiencing economic strength. Relying solely on the stock market can mislead consumers into thinking the economy is strong, while optimism in stocks can mask deeper weaknesses, such as rising inflation and job losses. The real measure of economic strength lies not only in stocks but also in the strength of households. Stable jobs, affordable everyday pricing, and improved housing prosperity are indicators of a strong economy, and the reality shows that we’re just not there yet.
Curtis Scoon is the founder of ScoonTv.com Download the ScoonTv App to join our weekly livestream every Tuesday @ 8pm EST! Support true independent media. Become a VIP member www.scoontv.com/vip-signup/ and download the ScoonTv App from your App Store.
