Consumer sentiment dropped for the fifth straight month in April to reach its second-lowest level since the 1950s.1 The continued pessimism was felt across all major demographics, including income, age, education, geographic region, and even political affiliation. Yet consumer sentiment is considered “soft data” that doesn’t always marry with the “hard data” of retail spending and, by extension, stock prices. It also doesn’t always react in tandem with other market forces like tariff announcements and other big headlines.
So far this year, we’ve seen an all-time high in the S&P 500 in February, a market correction and a full-blown bear market in April, followed by a rebound approaching bull territory in May. There’s undoubtedly more yo-yoing to come and the way consumers feel about it will continue to be a key economic indicator.
Consumer sentiment is a statistical measure of how people feel about the economy, job prospects, and their finances. It is measured with household surveys on a monthly basis by the Conference Board’s Consumer Confidence Index (CCI) and the University of Michigan’s Michigan Consumer Sentiment Index (MCSI).*
High consumer sentiment leads to more shopping and spending, which boosts the economy. Personal consumption accounts for nearly 70% of U.S. GDP.2 But when consumer sentiment is low, as it has been so far this year, consumers tend to save money and spend less on discretionary items. Investors care about consumer sentiment indices because such a pullback in spending dampens demand for goods and services, which impacts earnings, corporate investment, employment, and the stock market.
But sentiment does not always align with the spending reality and it’s certainly not the only factor in the moves of the market. Consumers might claim low confidence in surveys, but continue to buy new cars and eat out at restaurants. Consumer sentiment starts to impact investment portfolios when their spending matches their feelings — when the soft data matches the hard data.
The soft data: Consumer sentiment has dropped 30% since December 2024.1
The hard data: U.S. GDP growth turned negative in Q1 2025 for the first time in three years.3
The soft data: The share of consumers anticipating a rise in unemployment this year is now double what it was in November 2024.1
The hard data: The seasonally-adjusted unemployment rate is level with that of November 2024.4
The soft data: Consumers expect inflation to reach 6.7% this year, the highest anticipated level since 1981.1
The hard data: Inflation rates have declined so far this year, from 3.0 in January to 2.3 in April.5
These data show that spending may indeed be reflecting sentiment, though the evidence behind such low sentiment may be lacking, or at least lagging. And all the ups and downs of the stock market this year so far have much more to do with tariff policy and trade talks than they do with the realized impacts of those policies. In a year of heightened market volatility, one sure bet may be to expect even more of it in the coming months.
Whichever way the market tides turn this year, investors can employ strategies that buffer against a downturn if one is realized and sustained, while at the same time capturing upside if the soft and hard data diverge. TrueShares Structured Outcome ETF Series contains 12-month rolling ETFs that aim to buffer against the first 10% of losses in the market. If consumer sentiment leads to reduced spending, corporate earnings, and stock valuations, a downside buffer may protect against some of those losses while allowing investors to stay in the equity market and capture the rebound. If consumer sentiment doesn’t lead to a drop in spending and the economy remains solid, the Structured Outcome Series doesn’t place a cap on upside earnings.
Consumer sentiment might be down, and the market might be all over the place, but with TrueShares Structured Outcome ETF Series, one’s portfolio has the potential for a much smoother ride through the tumult.
- https://www.cnn.com/2025/04/11/economy/us-consumer-sentiment-april
- https://www.investopedia.com/terms/c/consumer-sentiment.asp
- https://finance.yahoo.com/news/economic-growth-is-moderating-but-data-doesnt-show-clear-signs-of-a-looming-recession-080012275.html
- https://www.bls.gov/news.release/pdf/empsit.pdf
- https://www.usinflationcalculator.com/inflation/current-inflation-rates/
*Conference Board’s Consumer Confidence Index (CCI): a survey administered by the Conference Board that measures consumer attitudes and confidence regarding their financial prospects. It is based on the Consumer Confidence Survey, which has a responding sample size of 3,000 questionnaires.
University of Michigan’s Michigan Consumer Sentiment Index (MCSI): a monthly survey of consumer confidence levels in the United States conducted by the University of Michigan. The survey is based on telephone interviews that gather information on consumer expectations for the economy, such as how they feel about personal finances, business conditions, and buying conditions.
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