The middle class is feeling better, but the wealthy are feeling worse

There are temperature inversions and tax inversions. Now there may be a confidence inversion, as well.

Consumer confidence surprised economists in January, with an index of consumer moods maintained by the Conference Board improving from 96.1 in December to 98.3. The cutoff for the survey was Jan. 14, but that was still long enough for a tumbling stock market (as measured by the S&P 500 index) to have fallen by more than 4%, which in theory should have made consumers gloomier.

It certainly put some Americans in a sour mood. Confidence fell among households with $75,000 or more in income. But confidence rose among families earning between $25,000 and $75,000, which is a pretty good estimation of the range for “middle class.”

The divergence probably comes directly from economic developments. The tumbling stock market affects wealthy Americans more because they’re more likely to own stocks and other securities. A lot of middle-class Americans have a 401(k) plan or other retirement fund, but if you’re not dependent on that money for day-to-day income, you’re not likely to be spooked by short-term volatility. It’s probably a good idea to not even look at your retirement balance during turbulent times, if you’re not planning to tap it for years.

Other trends strongly favor those living on a budget—most notably, the plunge in energy prices. The average price of gasoline has been less than $2 per gallon for nearly a month, generating a windfall that could put more than $900 in the pockets of the average family this year, according to forecasting firm IHS Global Insight. Home heating costs are lower, too, for those who use oil or natural gas.

Some economists believe the pain caused by cut-rate oil prices of around $30 a barrel—mainly in the oil and gas sector, where layoffs are rampant and debt defaults are starting to pile up—outweighs any benefit to consumers. But the benefits may simply be less tangible than the costs, since they’re manifest in confidence levels but not necessarily in spending. Still, confident consumers will up spending sooner or later, though not necessarily on the same things they did in the past.

Two other factors are keeping consumers buoyant. First, jobs are becoming more plentiful and layoffs are scarce, enhancing job security. And the housing market is finally getting back to normal, with modest price appreciation of 6% or so and more entry-level homes coming on the market.

Wealthy households still show higher confidence levels overall than middle-income ones, but the rise of the middle is long overdue. For nearly seven years we’ve had a recovery that trickled from top to bottom. It might finally be reaching the intended target.

Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.