Consumers are feeling gloomy about the economy right now… and the University of Michigan’s awful Consumer Sentiment Report shows that the outlook is only getting worse.
There’s no other way to put it – consumer sentiment is crashing. The university’s headline index dropped from 64.7 in February to 57.9 in March, its lowest level since November 2022.
The Current Conditions Index dropped to 63.5, its lowest since September 2024. And the Expectations Index dropped to 54.2, its lowest since July 2022.
Across the board, consumer sentiment is collapsing. But this is not a new trend; it’s been happening all year long.
Over the past three months, consumer sentiment has dropped by 21%, its largest three-month crash since the depths of the COVID-19 pandemic in summer 2020.
That’s ugly data.
However, as we all know, there’s perception, and there’s reality.
In reality, are things really that bad?
At 2.3%, gross domestic product (GDP) growth is still positive. Consumer spending is steady. Unemployment is low at 4.1%. Inflation is falling, currently hovering around 2.8%. At about 4.3%, according to the Federal Reserve Bank of Atlanta, wage growth is strong and running above inflation. And as the fourth-quarter earnings season illustrated, corporate profits are still growing, with more than 75% of the S&P 500 exceeding consensus estimates.
Sure, we have ongoing tariff drama and policy uncertainty. But the economy still remains on solid footing.
So, while sentiment is in the basement right now, the real economy appears to be doing just fine.
That could change, of course. But as of right now, economic conditions are pretty normal.
That’s why we think consumer sentiment will rebound over the next few months – and as that happens, stocks should, too…
Is the Bottom Near?
Consumer sentiment is currently being walloped by tariff drama, federal spending cuts, and policy uncertainty. But we think all those dynamics will ease in the coming months.
In our view, the Trump administration is front-loading these moves so it can pave the way for other things – like a big tax cut package and more deregulation – which should boost consumer sentiment.
That is, we believe temporarily bad policy developments are weighing on consumer sentiment. But as the administration shifts focus in the coming months, consumer sentiment should rebound.
The data seems to agree with this thesis.
The University of Michigan’s Consumer Sentiment Index has crashed to levels that are historically considered the “bottoming zone.”
Since 1980, consumer sentiment has oscillated violently between really low and really high readings. But it has consistently bottomed in the 50 to 60 range.
In 1980, amidst the Federal Reserve’s aggressive rate-hiking cycle, it bottomed at 52. In 2008, it bottomed at 55 during the financial crisis. It bottomed at 56 in 2011 during the European sovereign debt crisis and at 50 in the thick of 2022’s inflation crisis.
The consumer sentiment index just dropped below 58. Historically speaking, we’ve reached the bottoming zone.
If this truly is the bottom, then this could be a really good time to be buying stocks…
Because big consumer sentiment rebounds out of the bottoming zone – like we saw in the early 1980s, coming out of the GFC, in 2012/13, and in 2023/24 – coincided with major market rebounds.
The Final Word on Consumer Sentiment
Wall Street is in turmoil right now.
This week, the S&P 500 fell into correction territory – dropping 10% from recent highs – in one of its fastest crashes of all time. Similarly, the Nasdaq has crashed 15% from recent highs, and the Russell 2000 has plunged almost 20%.
But if we’re right about consumer sentiment data finding a bottom soon… then stocks should do the same… meaning Wall Street’s recent volatility is actually creating a great buying opportunity.
That’s why we’re telling our subscribers to back up the truck and buy stocks right now.
But where should folks look for the best buying opportunities?
It’s no secret that we’re bullish on AI – the greatest technological revolution in three decades. This breakthrough has already created fabulous investment opportunities, allowing investors to lock in ~990% gains in Palantir (PLTR) and 400% profits in Nvidia (NVDA) over the past two years. And so much more is yet to come.
But here’s the challenge: the broader AI trade is crowded. That’s why we’ve been hunting for the next big industry breakthrough…
And we’ve found it in what I call AI 2.0 – a development that could be an order of magnitude bigger than anything we’ve seen in the AI Boom so far.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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