The RealClearMarkets/TIPP Economic Optimism Index for the United States rose to 42.6 in May. This was above the forecast of 42.
The index remained below 50, which is the level that separates optimism from pessimism. The May reading indicates that sentiment stayed in negative territory despite the rise.
Economic Optimism Still Below Neutral
The May economic optimism index came in at 42.6, which was a slight beat over the forecast but still shows clear pessimism among consumers. This is not a signal of strength, but rather a sign that things might not be getting worse as quickly as anticipated. Given this, we see it as a “less bad” piece of data that could temper some of the market’s recent downside fears.
We should consider selling some near-term volatility, as this release might put a floor under equities for now. With the VIX currently hovering around 18, selling out-of-the-money puts on major indices allows us to collect premium on the idea that an immediate crash is less likely. We saw how volatility dropped sharply after the recession scare in late 2025 failed to materialize, and this could be a similar, smaller-scale opportunity.
This data point on its own won’t shift the Federal Reserve’s thinking, especially after the April jobs report showed a still-tight labor market with 190,000 new jobs. However, it does slightly reduce the probability of the aggressive rate cuts the market was pricing in for the third quarter. We will be adjusting our interest rate derivative positions to reflect a slightly more hawkish Fed for a little longer.
Combined with last month’s core PCE inflation data that remained sticky at 2.9%, this sentiment reading reinforces a narrative of a sluggish but resilient economy. This environment supports strategies that benefit from a range-bound market rather than a strong directional move. We believe options strategies like iron condors on the SPX could perform well over the coming weeks.
