Soaring stock market doesn't mean economy has recovered | Expert Opinion

The stock market may be hitting record highs, but economist Mark Zandi wants you to know that the numbers on Wall Street don't tell the whole story. Consumer sentiment remains stubbornly low, and small-business owners across the country are exhibiting what Zandi describes as a posture of cautious nervousness — not panic, but far from confidence.

The disconnect between market performance and everyday economic feeling is not new, but it has become increasingly pronounced. While major indices climb, ordinary Americans continue to feel the pinch of elevated prices, particularly at the grocery store and the gas pump. The labor market, though resilient, has shown signs of softening in certain sectors. And the threat of tariffs and geopolitical disruption continues to cast a shadow over business planning.

Zandi, chief economist at Moody's Analytics, notes that small businesses — often described as the backbone of the American economy — are in a holding pattern. They're not cutting jobs en masse or shuttering operations, but they're also not investing aggressively or hiring expansively. It's a wait-and-see stance that, when multiplied across millions of businesses, translates into sluggish growth.

The stock market, by contrast, is forward-looking and heavily influenced by a relatively small number of large-cap technology companies. When a handful of mega-cap stocks rally, they can lift the entire index regardless of how the broader economy is performing. This creates a misleading picture for anyone who equates market gains with economic health.

What This Means For You: Don't let record stock indices lull you into complacency. If you're a small-business owner, now is a time to stress-test your financials and maintain flexibility. For everyday investors, diversification remains critical — the rally may be narrow, and a reversal in a few big names could drag your portfolio down even if the headlines suggest everything is fine. Pay attention to what you're spending, not just what the markets are doing.