Two in Three Americans Are Cutting Back on Spending — While Wall Street Hits Record Highs

Two out of every three Americans are pulling back on spending, according to new survey data that exposes a growing disconnect between the stock market's record-breaking run and the financial reality most people are living. The Conference Board's consumer confidence index slipped 0.7 points to 93.1 in May, the first decline after three months of gains, and a number that would have been considered alarmingly low before the pandemic — it regularly topped 130.

The survey data, combined with the University of Michigan's separate sentiment gauge that also fell in May, paints a picture of an economy where the macro numbers look strong but the ground-level experience feels precarious. Understanding why requires looking past the headline GDP figures and into the specific pressures squeezing household budgets.

**The numbers behind the pullback**

The consumer confidence decline isn't happening in a vacuum. Gas prices remain elevated. Grocery costs haven't meaningfully retreated from their pandemic peaks. Housing costs — whether rent or mortgage payments — continue to consume a larger share of household income than at any point in decades. And while wage growth has nominally outpaced inflation over the past year, the cumulative effect of several years of elevated prices hasn't been erased by a few months of modest real wage gains.

The Conference Board's data shows that the share of consumers expecting their incomes to grow over the next six months fell, while the share expecting business conditions to worsen rose. This isn't abstract pessimism — it reflects real trade-offs that households are making. When two-thirds of survey respondents say they're cutting back on discretionary spending, they're describing canceled subscriptions, deferred purchases, and meals at home instead of restaurants.

**Why Wall Street and Main Street are telling different stories**

The S&P 500 and Nasdaq have both notched record highs in recent weeks, driven by blockbuster earnings from AI-adjacent companies and strong corporate profit margins. Micron just became the latest company to cross the $1 trillion market cap threshold, joining a roster of tech giants whose valuations reflect investor enthusiasm for the AI infrastructure buildout.

But stock market gains concentrate among the roughly 58% of American households that own any stocks at all, and the benefits skew heavily toward the top. The wealthiest 10% of Americans hold about 93% of all stocks. For the median household, the market's record highs are a headline, not a balance sheet item.

Meanwhile, the costs that dominate most household budgets — food, housing, transportation, and healthcare — have risen faster than the Consumer Price Index suggests for lower-income families, who spend a larger share of their income on essentials. The official inflation rate might be cooling, but the lived experience of inflation at the grocery store and the gas pump hasn't caught up.

**The spending cuts that matter most**

The survey data shows consumers are pulling back most aggressively in three areas: dining out, entertainment, and discretionary retail purchases. These are precisely the categories that drive a disproportionate share of small business revenue. When consumers cut restaurant spending by 10-15%, as many respondents indicated, the impact ripples through local economies — fewer shifts for servers, less inventory for suppliers, reduced foot traffic for neighboring businesses.

This is the downstream effect that GDP figures often miss. Aggregate consumer spending might hold steady because higher-income households are still spending freely, but the distributional shift matters. If middle- and lower-income households are cutting back while top-decile spending holds up, the businesses that serve those segments face a very different recession than the one that shows up in national statistics.

**The psychological factor**

Consumer confidence is partly a self-fulfilling prophecy. When people expect tough times ahead, they cut spending, which reduces business revenue, which leads to hiring freezes or layoffs, which validates the original fear. The Conference Board's index at 93.1 is not yet at recessionary levels, but the direction of travel matters. Three consecutive months of gains followed by a decline suggests the momentum has stalled.

The political environment compounds the uncertainty. Trade policy shifts, potential tariff escalations, and mixed signals from the Federal Reserve on rate cuts all create an environment where consumers feel they can't plan with confidence. Uncertainty itself acts as a tax on spending — when people don't know what costs will look like in six months, they save more and spend less as a hedge.

**What This Means For You**

If you're feeling the squeeze, the data confirms you're not imagining it — and you're not alone. The stock market's record highs don't reflect the budget pressures most households are navigating. The practical takeaway: this is a good time to audit your own spending patterns, identify the subscriptions and recurring costs you can trim, and build or reinforce an emergency fund if possible. The economic data says we're not in a recession, but the consumer confidence data says many people feel like we are. When the official numbers and the lived experience diverge this sharply, the smart move is to prepare for the reality you're experiencing rather than the one the headlines describe.