What to Watch Ahead of the Midterms

Summary

Two Morgan Stanley analysts discuss consumer survey data showing gradual improvement in confidence but a still-negative net outlook. Spending intentions remain stable with a tilt toward essentials and away from discretionary items, especially consumer electronics, where price hikes from high memory chip costs add pressure. Inflation remains the top concern, and no new fiscal stimulus is expected. The midterm election picture points to a slight Democratic advantage, supported by high turnout in primaries but with risks of a fragile majority.

• Consumer confidence recovering gradually but still net negative.
• Spending plans: essentials prioritized, discretionary weak, weakest in consumer electronics.
• Consumer electronics makers raising prices due to high memory chip costs amid weak demand.
• No additional legislative stimulus expected for consumers.
• Oil shock neutralized the fiscal boost from tax refunds, hitting lower-income households harder.
• Midterm elections: slight Democratic advantage, high primary turnout, potential fragile majority.
• Inflation remains the top consumer concern, with political and geopolitical worries rising.