Published October 24, 2025
The article from Delta Research below discusses the odd intersection between consumer sentiment, labor markets, and stock prices. What is good for Wall Street right now might not be good for Main Street.
“The ten largest US stocks, eight of which are tech-related, now account for nearly 25% of the global equity market and represent a collective value greater than the economic output of Germany, Japan, India, the UK, France, Italy, and Canada combined. JPMorgan expects S&P 500 third-quarter earnings to be up 12% year-over-year versus the consensus expectation of 8%. Artificial Intelligence (AI) capital spending was up 56% year-over-year in the first half of 2025 and is expected to grow at least 35% in the next twelve months. The Dow Jones Industrial Average reached a new record high this week.
Stock market valuations are being supported by a tremendous AI spending cycle, expansive fiscal policy (i.e., substantial government spending), lower interest rates and higher tax refunds in early 2026. For 2026, the consensus S&P 500 earnings estimate is now $304.87, up 14.2% year-over-year.
Paradoxically, the same forces lifting stock valuations may be weighing on consumer sentiment. For example, the expected change in the unemployment rate over the next year has rarely been this weak outside recessionary periods since the University of Michigan started asking the question in 1978.
Hiring Plans vs. AI Adoption
Many companies are slowing hiring until they better understand how AI might impact labor needs. For example, certain sectors such as marketing and call centers—where AI is substituting for labor—are experiencing job growth about 10,000 below pre-pandemic trends. Meta is looking to eliminate 600 jobs in its artificial intelligence division. Goldman Sachs announced a hiring slowdown and potential job cuts through year-end as it is assessing the impact of AI on its personnel needs. “The rapidly accelerating advancements in AI can unlock significant productivity gains for us, and we are confident we can reinvest those gains to continue delivering world-class solutions for our clients.” – Goldman Sachs’ memo signed by CEO David Solomon, President John Waldron and CFO Denis Coleman.
Youth unemployment underscores the challenge: the jobless rate for 16–19-year-olds is 13.9%. The unemployment rate for 20–24-year-olds is 9.2% per the Bureau of Labor Statistics (August 2025). AI may be making it more difficult for recent graduates to secure entry roles.
Sentiment vs. Stocks
The CNN Fear & Greed index (scale 0-100, 0=Extreme Fear, 50=Neutral, 100-Extreme Greed) is currently about 26 which expresses a “risk-off” sentiment. Below is a chart showing the recent divergence between the CNN Fear & Greed index and the S&P 500.
The stock market and Main Street are not the same thing. Rapid productivity gains can boost corporate profitability while disrupting the labor market. Over time, technological advances tend to raise the standard of living for all. Currently, it may cause the stock market to climb a wall of worry.
Market Update
Stocks opened the week with news of strong iPhone sales sending Apple shares higher by +4%. That news left the broad market indexes +1% for the day. Solid earnings from General Motors and defense contractor RTX kept the bid under stocks Tuesday. The broad market ticked higher by +0.5%. Gold finally suffered a notable pullback with investors cashing in some of the record-setting run in the metal. A report suggesting higher curbs on U.S. software sales to China sent the Nasdaq down -0.9% Wednesday. More good earnings news and a bit less trade tension allowed a positive reversal for stocks Thursday with the Nasdaq recouping Wednesday’s loss. Reports from IBM and Honeywell were among those providing strong earnings support. A lower than expected inflation report helped stocks leap higher Friday with the S&P 500 rising +1% to cap a positive week. Quantum computing stocks were also winners this week on rumors of possible government investment in the sector.
Investors got solid earnings, a favorable inflation report, and possible easing trade tensions this week to push the S&P 500 (SPY) higher by +1.94% to a fresh record close. The Nasdaq 100 (QQQ) popped +2.18% while the small cap index (IWM) added +2.47%.
Warm wishes and until next week.