Consumer confidence hits record low amid Iran war fears, K-shaped economy concerns

Consumer confidence hits record low

The disconnect between official economic data and how ordinary Americans feel about their finances has led experts to describe the current environment as a "K-shaped economy."

WASHINGTON, D.C. - U.S. consumer confidence fell to its lowest level on record this month, driven by fears over rising costs tied to the ongoing war in Iran, even as official government data suggests the broader economy remains relatively stable.

Consumer concerns

By the numbers:

The University of Michigan's Consumer Sentiment Index dropped to 49 points in April, down from 53 points in March. 

The April reading is the lowest ever recorded by the index.

The disconnect between official economic data and how ordinary Americans feel about their finances has led experts to describe the current environment as a "K-shaped economy."

What they're saying:

"A K-shaped economy is when a majority of the population has reduced their spending as if feeling the effects of a recession, yet the wealthiest of the population have actually increased their discretionary spending," said Brie Mason, a financial advisor with Authentikos Advisory Group. "That keeps the economy moving forward."

Mason noted that the United States has not technically entered a recession, which is defined as two consecutive quarters of negative GDP growth, but that many Americans feel as though it has.

She also cautioned that the underlying conditions driving economic anxiety predate the Iran war and are unlikely to resolve when it ends.

"We all know that prices are higher than they used to be," Mason said. "What we have to remember about inflation is that it doesn't necessarily mean prices come down when inflation goes down. It just means that they don't grow as fast."

What you can do:

Mason offered steps consumers can take to protect themselves. 

She recommended building an emergency fund covering three to six months of expenses in cash or cash equivalents, noting that economic slowdowns often precede business contractions and layoffs. 

Mason also advised maintaining a diversified investment portfolio spread across stocks, bonds, cash and assets such as cryptocurrency to better weather market downturns.