Remember that scene where Wile E. Coyote runs off a cliff, keeps sprinting through thin air for a few seconds, then suddenly realizes there’s nothing beneath his feet? Yeah, that’s basically where the US economy is right now, according to UBS’s chief economist Paul Donovan. And honestly, it’s a pretty perfect metaphor.
Here’s the deal: consumers are still spending like the Iran war isn’t happening. Gas prices are through the roof, oil is expensive, and yet people are out here maintaining their lifestyles like gravity hasn’t been invented yet. Bank of America just reported that consumer spending hit its strongest pace since early 2023. Sounds great, right? Except there’s a catch—people are basically draining their savings accounts to keep up appearances.
The problem is that higher oil prices are quietly eating away at purchasing power, especially for lower-income folks who spend a bigger chunk of their paycheck on gas. Meanwhile, wealthier consumers are still flexing, which is why we’re seeing this weird “K-shaped economy” where the rich keep getting richer and everyone else is just… hanging on. Donovan’s warning is simple: this can’t last forever. Eventually, gravity wins.
“Developed economies, consumers are still happily running across thin air,” Donovan said. Translation: we’re all about to realize there’s no ground beneath us.
The Stock Market’s Outrunning a Bear
But wait, there’s more! The stock market has been hitting record highs despite all this chaos. Piper Sandler’s chief market technician Craig Johnson describes the current vibe as “trying to outrun a bear”—which is a fancy way of saying investors are ignoring a massive problem that’s definitely coming for them.
Here’s what’s wild: the market is up, but everyone knows something’s off. The bear could be the economic fallout from the Middle East conflict, disruptions in the Strait of Hormuz, or an escalation in the war itself. Yet investors are just… not dealing with it. Johnson nailed it when he said people “don’t know how to trade a geopolitical situation,” so they’re just pretending it doesn’t exist.
The sentiment data backs this up. In mid-April, nearly half of investors were bullish—compared to only about a third when the war started. So either people got way more optimistic, or they just got really good at ignoring bad news.
The Bottom Line
The disconnect between what’s happening in the real economy and what’s happening in the stock market is getting harder to ignore. Consumers are cutting savings to maintain spending. The stock market is hitting records while geopolitical risks loom. And somewhere, Wile E. Coyote is still running through the air, blissfully unaware of what’s about to happen.
The question isn’t if gravity will kick in—it’s when. And when it does, that cartoon plunge is going to feel very real.
