Ross Gerber, CEO of the investment firm Gerber Kawasaki, highlighted on Sunday that U.S. stocks are enjoying a strong rally, but Americans are feeling the pinch of higher prices.
Stocks Surge, Food Prices Rise
In a post on X, Gerber stated, “Higher markets doesn’t make food cheaper. Stocks are a hedge against inflation.
Gerber’s remarks put market performance and household budgets in stark contrast, arguing that rising asset prices can protect investors without easing day-to-day expenses. He argued, “People are out spending money…” “Tourists out in full force in Santa Monica… but they are unhappy at the cost.”
Consumer Confidence Hit Multi-Decade Low
The comments from Gerber came after data showed that the stocks are partying like 1999 while Americans are losing confidence at levels not seen in 70 years, according to The Wall Street Journal report. The divergence matters because upbeat markets and upbeat consumers typically move in the same direction, and that relationship looks badly strained in 2026.
The University of Michigan’s consumer sentiment index fell to a 70-year low level of 44.8 in May, compared to a preliminary reading of 48.2. Consumer confidence has been soft at the start of the year and deteriorated sharply after the war with Iran began, which pushed energy prices higher.
“Prices remain extremely high, labor markets have unambiguously weakened in the last four years, and now we’re in the middle of a war,” said Joanne Hsu, director of the University of Michigan.
Record High Stock Market
The U.S. stock market has been hitting new highs, as investors bet on artificial intelligence, resilient earnings and a still-growing economy. The S&P 500 is on its largest winning streak since December 2023, having risen for eight weeks in a row. The index is up 9.2% since the start of the year.
The latest S&P 500 rally makes the valuation expensive with a P/E ratio of 40.8, a popular metric by Nobel laureate Robert Shiller. The last time the ratio climbed above 40 was in the years just before and after the peak of the dot-com bubble in early 2000. At that time, both the stock market and consumer confidence were strong, with the Michigan sentiment index at an all-time high.
Why Disconnect in 2026?
Robert Barbera of Johns Hopkins University’s Center for Financial Economics outlined three reasons behind the disconnect between the stock market and Americans’ optimism.
First, equity prices may be getting ahead of the economic outlook, leaving consumers’ downbeat view closer to reality. Another is that markets may be discounting a brighter path ahead, such as easing inflation, stronger growth, or an end to the Iran conflict, before households feel it.
The third force is artificial intelligence. According to the report, Barbera argued that the same AI trend lifting profit expectations can also fuel anxiety about job security.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a Benzinga editor.
Photo: iQoncept / Shutterstock
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