The IBD/TIPP Economic Optimism Index jumped 3.4 points to 56.6 into strongly optimistic territory at the start of July. A resurgent Dow Jones and rising hopes for a China trade deal fueled a bounce after trade fears had dragged down sentiment. Readings over the neutral 50 level reflect optimism.

Job Gains Slow, But Dow Jones Rises

Although job gains slowed to just 75,000 in May, Americans shook off a brief bout of pessimism about the six-month outlook for the U.S. economy. A great month for the stock market seemed to help. The S&P 500 touched a record high and saw its biggest June gain since 1997. The Dow Jones had its best June since 1938.

May's negativity also had reflected Trump's escalation of tariffs on China on May 10 and short-lived threat to impose tariffs on Mexico. Trump relented after Mexico agreed to deploy its national guard to stem the flow of migrants to the U.S. border.

Helping the outlook, 65% of Americans expected a trade deal going into the Trump-Xi summit. That would be a relief, since a plurality think Trump tariffs hurt the U.S. economy and should be withdrawn. Expectations took a positive turn after Trump tweeted on June 18 that he and Chinese President Xi Jinping had had a "very good" talk and agreed to an "extended meeting" at the G-20 in Osaka, Japan. The Saturday meeting yielded a cease-fire, largely thanks to Trump's conciliatory stance on Chinese communications equipment giant Huawei.

Among self-described investors, the economic optimism reading rose 4.7 points to 59.4. Among non-investors, sentiment grew 2.8 points to 52.7.

Economic Optimism Index Components

The IBD/TIPP Economic Optimism Index is a composite of three major subindexes. They track views of near-term economic prospects, the outlook for personal finances, and views of how well government economic policies are working.

The six-month outlook gauge for the economy rose 3.9 points to 51.6, continuing a series of up-and-down readings that seem to follow the Dow Jones and China trade war headlines. The subindex hit a 13-year high of 57.5 in February 2018 on the heels of tax cuts.

The six-month personal financial outlook index rose 2 points to 63.1. The October reading of 66.7, coming as the Dow Jones hit a record high just below 27,000, was an all-time best for the IBD/TIPP Poll, which dates back to 2001.

Meanwhile, the measure of confidence in federal economic policies jumped 4.3 points to 55.0. May's 55.6 reading was the highest since April 2003. That topped the 13-year high of 53.7 in November, before the government shutdown.

The new IBD/TIPP Poll covers 900 responses from June 20-27.

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