DATA & FIGURES
The University of Michigan's Consumer Sentiment Index has been running below 70 the entire time since 2022, levels that historically only appeared during deep recessions. The gap between the sentiment index and GDP growth has broken in a way it never broke before, with GDP running between +2% and +3% year over year for three straight years. Retail sales rose 0.5% in April and are running 4.9% above year-ago levels. Q1 earnings season has delivered an 84% beat rate on the S&P 500, well above the 5-year average of 78%, with aggregate earnings beating estimates by 20.7%.
THE SCENARIO
The geopolitical, economic, or regulatory context of the consumer sentiment disconnect is complex. The University of Michigan's Consumer Sentiment Index is capturing tribal loyalty, with the partisan gap in consumer sentiment now far larger than the gap by income, age, or education level.
DIRECT QUOTE
"_The Michigan survey isn't broken. It's measuring something narrower than the headline suggests, and what it's measuring is real. The question is whether what it's measuring should drive your portfolio._" — Lance Roberts, RealInvestmentAdvice.com
BBN INSIGHT
The consumer sentiment disconnect is not just noise, but a combination of partisan distortion, methodology distortion, and a genuine bipartisan reaction to higher prices. The Conference Board's Consumer Confidence Index tells a different story, with its index sitting near its long-term average and remaining well above every cyclical low of the modern era.