US stock market props up economy despite weak jobs and political risk. What could go wrong?
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The stock market is keeping the U.S. economy afloat while jobs stay flat and politics add more uncertainty. Consumer spending in August beat forecasts and incomes rose, even as many expected the country to already be near recession. Households and companies kept buying big items. Inflation was muted. Housing surprised with new home sales hitting a three-year high. In earlier years, this kind of momentum came from stimulus checks, low rates, and liquidity from the Federal Reserve. Today, it comes from Wall Street and the wealth effect of record-breaking indexes. Mark Zandi, chief economist at Moody’s Analytics, said Friday: “I do think that goes to the bounce in the stock market and the wealth effect. I think all of the spending is coming from the well-to-do high-income high-net-worth households that are seeing their stock portfolios are up and they’re feeling a lot better off and they’re spending.” The rally has been steady all year. Artificial intelligence investment pushed demand, and industrial and communications giants added strength. The Dow Jones Industrial Average has gained more than 9%. The Nasdaq Composite is up 23%. Consumers often feel better when stocks rise and unemployment is low. Yet sentiment tracked by the University of Michigan is down 23% since January, when President Donald Trump returned to the White House. Consumer mood divides as market climbs In September, the Michigan gauge fell another 5.3%. Joanne Hsu, director of the survey, explained, “Sentiment for consumers with larger stock holdings held steady in September, while for those with smaller or no holdings, sentiment decreased.” The market has hit repeated records this month. Data from the St. Louis Fed show the top 10% of earners hold 87% of the entire market. Those investors are secure, but it shows the risks. Zandi added: “The economy’s very vulnerable if the…
Filed under: News - @ September 27, 2025 6:28 pm