The Consumer Sentiment Index for high-income families increased for the fourth time in five months from 71.4 in September to 88.2 in mid-February. That’s the best reading since December 2007, and well above the October 2008 low of 57.8. They must be benefitting from the 27.2% increase in the S&P 500 since Mr. Bernanke first mentioned QE2 on August 27, 2010 at the Fed’s annual meeting in Jackson Hole. That amounts to capital gains of $3.18 trillion based on the Wilshire Index. Of course, high-income families must also be pleased that Congress extended the Bush tax cuts for another two years. Washington has been very good to high-income families.
The Consumer Sentiment Index for low-income families reversed nearly all of its recent gains, falling from 72.1 in January to 67.7 in mid-February. Its recession low was 53.3 during November 2008. It has been fluctuating between 64 and 73 since April 2009. Low-income families are not likely to be benefitting from the rally in stocks. They probably remain more vulnerable to long-term unemployment and wage cuts. To add insult to injury, Mr. Bernanke’s focus on core inflation is irrelevant to most of them. Food and fuel costs matter to them more than to high-income families.