Stock Shocks Start Hitting Home

The Trump administration’s implementation of tariffs on imports on virtually a global scale has created turmoil on Wall Street that’s increasingly making its presence felt on Main Street. That’s reflected in latest results of the Bain & Co./Dynata Consumer Health Indexes, which showed the spending outlook for upper-income American consumers’ has plunged in the face of the recent tariff-related upheavals in the stock markets.

That in turn, threatens “to trigger significant contractionary pressures in the U.S, economy,” the report notes. Translation: It could well flatten the economy.

“Our outlook index is in historic decline, led by upper-income earners,” said Brian Stobie, Senior Director in Bain’s Macro Trends Group. “Not surprisingly, upper-income consumers are extremely concerned about their investment portfolios. Since the performance of these assets forms the basis of perceived financial health for this group, we would expect spending to decline if this outlook level persists.”

In specific, the Consumer Health Indexes’ outlook score for upper-income Americans plummeted in April by 11.8 points to 88.6, experiencing its sharpest ever drop (except for that seen at the onset of the Covid-19 pandemic), and slumping to the lowest level seen since that time. The fall in the outlook score for better-off U.S. consumers contributed to a 5.3-point fall in the CHI’s overall outlook reading for all such shoppers consumers, which dropped to 94.6 this month.

Counterintuitively, the April CHI data also shows upper-income consumers’ spending intentions rose significantly, by 2.1 points.

But while this would normally be viewed as a sign of consumer strength, the Bain/Dynata analysis concludes that, “with the upper-income group’s spending intentions having jumped just as tariff moves were announced, the rise points to better-off Americans pulling forward spending to ‘front-run’ potential tariff impacts by making intended purchases early. … This pattern means effects on consumer spending from a worsening outlook for upper-income consumers may not appear immediately.”

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