The Market Is Recovering Bigly, But Consumer Expectations Remain Anemic

This past week, the S&P 500, Nasdaq Composite, and Dow did something they haven’t done a lot of recently — they rallied. America’s three most-watched indexes rose 5.6%, 8.3%, and 3.1%, respectively. And while they remain in the red on the year, that might not be the case for much longer as the market’s recovery gains steam, even though consumer indicators continue to print to the downside.

• First, it was the Conference Board hitting four-year lows, and now the University of Michigan Consumer Sentiment results for April are showing massive declines in confidence both month-over-month and year-over-year.
• Consumer expectations worsened the most, with year-ahead inflation expectations soaring to 6.5% — their highest reading since 1981.

Could we be about to turn a corner? Companies are warning about uncertainty, but consumers are repeatedly stressing that they think things are going to get worse — and much worse. Against the backdrop of the recent rally, the showing betrays the sense that something might very well still be off, even as the market embraces comments from President Trump that he might walk back portions of his uncertainty-inducing economic policies and that he’ll respect the Fed’s autonomy. But as the President teases reducing China’s 145% tariffs and boasts about striking over “200 deals” already, it’s fair to wonder — is the consumer anxiety we’re seeing just a lagging indicator?