{"id":13774,"date":"2025-05-21T16:10:53","date_gmt":"2025-05-21T16:10:53","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=13774"},"modified":"2025-05-21T16:10:54","modified_gmt":"2025-05-21T16:10:54","slug":"the-disconnect-between-consumer-sentiment-and-the-market","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/the-disconnect-between-consumer-sentiment-and-the-market\/","title":{"rendered":"The Disconnect Between Consumer Sentiment and the Market"},"content":{"rendered":"\n<p><em>Alma A. from Lakeville, MN asks: <\/em>Hello Mitch, I\u2019ve seen reports that Americans are feeling very pessimistic about the economy at the moment. And yet, the stock market is acting like everything is hunky dory and all is well. I have a hard time wrapping my head around these two very different outcomes. Can you explain?<\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>Thank you for sending in your question. Let\u2019s first expand on the sentiment part of your question. According to the University of Michigan\u2019s index of consumer sentiment, Americans are feeling pretty dour on the economy. The index took another step down in May, falling to 50.8\u2014the second-lowest level since the survey began more than 70 years ago. That puts the reading just above the all-time low reached in mid-2022, during the height of the inflation surge.<sup>1<\/sup><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"816\" height=\"504\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2025\/05\/image-3.png\" alt=\"\" class=\"wp-image-13775\" srcset=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2025\/05\/image-3.png 816w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2025\/05\/image-3-300x185.png 300w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2025\/05\/image-3-768x474.png 768w\" sizes=\"auto, (max-width: 816px) 100vw, 816px\" \/><figcaption class=\"wp-element-caption\"><strong><em>University of Michigan<sup>2<\/sup><\/em><\/strong><\/figcaption><\/figure>\n\n\n\n<p><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/download-retirement-strategy-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2025_05_25&amp;content=retirement_strategy_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/download-retirement-strategy-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2025_05_25&amp;content=retirement_strategy_guide\">How to Shield Your Retirement from Market Ups and Downs<\/a><\/u><\/strong><\/p>\n\n\n\n<p>Consumer confidence just hit a historic low, yet the market keeps rising. How is that possible?<\/p>\n\n\n\n<p>Our free guide, <strong><em><u><a href=\"https:\/\/go.steadyinvestor.com\/download-retirement-strategy-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2025_05_25&amp;content=retirement_strategy_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/download-retirement-strategy-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2025_05_25&amp;content=retirement_strategy_guide\">How Solid Is Your Retirement Strategy?<sup>3<\/sup><\/a><\/u><\/em><\/strong>, shows how to build a retirement plan that can weather market swings, inflation shocks, and policy risks\u2014so you\u2019re not caught off guard. You\u2019ll also discover:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The importance of flexible portfolio allocation<\/li>\n\n\n\n<li>Why keeping some liquid assets can potentially help you preserve more wealth<\/li>\n\n\n\n<li>Understanding your risk tolerance in case of a market downturn<\/li>\n\n\n\n<li>Plus, more strategies to help you protect your retirement assets<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest, download our free guide to build a \u201cweatherproof\u201d retirement strategy and help safeguard your investments from future market shocks.<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/download-retirement-strategy-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2025_05_25&amp;content=retirement_strategy_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/download-retirement-strategy-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2025_05_25&amp;content=retirement_strategy_guide\"><u>Get our FREE guide: How Solid Is Your Retirement Strategy?<\/u><\/a><\/strong><sup><a href=\"https:\/\/go.steadyinvestor.com\/download-retirement-strategy-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2025_05_25&amp;content=retirement_strategy_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/download-retirement-strategy-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2025_05_25&amp;content=retirement_strategy_guide\">3<\/a><\/sup><\/p>\n\n\n\n<p>Perhaps you already see an important takeaway here. The last time the index of consumer sentiment was this low, inflation and interest rates were rising, and the stock market was in decline. But falling sentiment did not portend an economic recession, which in my view was a key driver of strong returns in 2023 and 2024 (in addition to the AI theme). In other words, as the U.S. economy ultimately performed better-than-expected, the stock market roared back.&nbsp;<\/p>\n\n\n\n<p>In the current environment, sagging sentiment can undoubtedly be tied to trade and tariff policy. Indeed, the share of survey participants citing tariffs as a top concern rose sharply in recent months, reaching three-quarters of respondents in the latest report. While the economic impact of these policies is still playing out, the psychological toll is already visible. One way to read this as an investor: expectations are falling, which arguably means the U.S. economy now has a lower hurdle to clear to surprise to the upside.<\/p>\n\n\n\n<p>Expectations for inflation have also moved higher, with consumers now projecting prices to rise more than 7% over the next year \u2014 up notably from last month. So what happens if inflation does not rise nearly that much? In my view, the answer is that sentiment will swing back to the positive, but the market will have already likely made its move.<\/p>\n\n\n\n<p>It\u2019s worth emphasizing that surveys like the index of consumer sentiment measure how people feel\u2014not necessarily how they act. Past episodes of low sentiment have not always coincided with declines in spending or investment. And in recent years, political affiliation has played a growing role in shaping consumer perceptions, which can skew readings further away from underlying economic reality.<\/p>\n\n\n\n<p>I don\u2019t mean to dismiss any and all risks here. Trade tensions remain high, and retaliatory measures or policy missteps could still dampen growth. But when sentiment hits historically low levels, it often sets the stage for positive surprises. I think today\u2019s pessimism may actually be laying the groundwork for potential upside, especially if trade negotiations improve or markets regain clarity. Relief, even in modest doses, can be a powerful force.<\/p>\n\n\n\n<p>With uncertainty ahead, it\u2019s crucial to prepare for the unexpected. To help you do this, I\u2019m inviting you to download our free guide, <strong><em><u><a href=\"https:\/\/go.steadyinvestor.com\/download-retirement-strategy-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2025_05_25&amp;content=retirement_strategy_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/download-retirement-strategy-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2025_05_25&amp;content=retirement_strategy_guide\">How Solid Is Your Retirement Strategy?<sup>4<\/sup><\/a><\/u><\/em><\/strong>. Inside, you\u2019ll find practical tips to build a \u201cweatherproof\u201d plan that helps protect your retirement savings through any challenge. You\u2019ll also discover:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The importance of flexible portfolio allocation<\/li>\n\n\n\n<li>Why keeping some liquid assets can potentially help you preserve more wealth<\/li>\n\n\n\n<li>Understanding your risk tolerance in case of a market downturn<\/li>\n\n\n\n<li>Plus, more strategies to help you protect your retirement assets<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest, download our free guide today!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This week&#8217;s question is one we&#8217;ve been hearing a lot lately: Why is the market doing so well when consumer sentiment is at historic lows? <\/p>\n","protected":false},"author":3,"featured_media":13548,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-13774","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13774","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=13774"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13774\/revisions"}],"predecessor-version":[{"id":13776,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13774\/revisions\/13776"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media\/13548"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=13774"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=13774"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=13774"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}