(Reuters) – U.S. consumer sentiment improved to its strongest level in seven months in early August, reflecting confidence in the outlook for the economy and in personal finances as the U.S. stock market holds near record highs, a key survey showed on Friday.

The University of Michigan’s consumer sentiment index rose to 97.6 in the first half of August from 93.4 the month before, which was an eight-month low. The result exceeded expectations for a reading of 94, according to a Reuters poll.

Whether that optimism holds in the weeks ahead, however, is a major question following recent events stemming from a white nationalist rally in Charlottesville, Virginia, said Richard Curtin, chief economist for the University of Michigan’s Surveys of Consumers. There were not enough survey interviews conducted following the protests, in which one woman died as white nationalists clashed with counter-protesters, to assess how much the events might weaken sentiment.

Curtin said the backlash over Charlottesville and U.S. President Donald Trump’s response could weigh on subsequent survey readings.

Trump has blamed the Charlottesville violence on not just the white nationalist rally organizers but also the counter-protesters, and said there were “very fine people” among both groups. His remarks drew rebukes from Republican and Democrat lawmakers as well as business leaders and U.S. allies.

“The fallout is likely to reverse the improvement in economic expectations recorded across all political affiliations in early August,” Curtin said. “Moreover, the Charlottesville aftermath is more likely to weaken the economic expectations of Republicans, since prospects for Trump’s economic policy agenda have diminished.”

FALLOUT FROM CHARLOTTESVILLE

The private sector has reacted to Trump’s remarks as well. Earlier this week, several chief executives quit Trump’s two business advisory groups in protest, resulting in the president disbanding the groups altogether.

Moreover, speculation emerged that key officials, notably director of National Economic Council Gary Cohn, could resign due to Trump’s controversial comments.

Cohn is seen leading the White House’s effort on tax reform and is a front-runner to possibly succeed Janet Yellen as head of the U.S. Federal Reserve.

On Thursday, rumors on social media of Cohn resigning spurred a sell-off on Wall Street and buying of U.S. Treasury bonds — a safe-haven market instrument in times of uncertainty — as traders feared Trump’s economic agenda would stall.

CURRENT, FUTURE DIVERGE

The rebound in University of Michigan’s overall consumer reading in early August was due to a jump in the survey’s expectations component. It rose to 89.0 from 80.5 in July.

On the other hand, the survey’s current conditions measure fell to 111.0 from 113.4 in late July.

“I would say that the economy is in good shape and is not especially sensitive to the latest political buzz, but how much of a hit confidence takes remains to be seen,” Stephen Stanley, Amherst Pierpoint Securities’ chief economist, wrote in a research note.

(Reporting By Dan Burns; Editing by Meredith Mazzilli and Chizu Nomiyama)