As the US gears up for Thanksgiving — and I attempt to bake a pumpkin pie — it feels like the perfect moment to look at two sentiment stories that don’t quite add up.
U.S. consumers are gloomy about the economy but wildly optimistic about equities… while ETF launches are exploding at a pace we haven’t seen in 15 years. Two contradictions, one theme: investor sentiment is getting weird.
Consumers Are Miserable — But Bullish on Stocks
One of the strangest sentiment divergences in years
Right now, U.S. households are sending two surprisingly different signals about the future:
The Conference Board shows households are close to the most optimistic they’ve ever been about future stock-market returns.
The University of Michigan shows households are close to the most pessimistic they’ve ever been about the economy and their own financial situation.
That’s a remarkable split — and one that says a lot about how investors are thinking right now.
A Rare Divergence
Normally, these series move together. When consumers feel good about their finances and the economy, they also tend to feel good about equities. When confidence collapses, stock-market expectations fall too.
Not this time.
Consumers are gloomy about the economy, but extremely remarkably upbeat about equity returns — a psychological mix we rarely see.
What Might Be Driving This?
- Pain in the real economy vs. trust in the Magnificent 7
Consumers are feeling the squeeze from prices, rents, mortgages, and job-market uncertainty. But simultaneously, the stock market — especially the largest tech names — has delivered strong, consistent returns. Households may distrust the economy, but they trust the S&P 500’s leaders.
- The wealth divide effect?
Stock-market optimism is heavily concentrated among households with market exposure. If you own equities, your portfolio looks good. If you don’t, the economy still feels hostile. But interestingly, the Michigan data shows that wealthier households are not materially more optimistic than less affluent groups. Economic pessimism is broad-based.
- Bullish Sentiment
Equities have climbed despite repeated recession warnings. Many households appear to have internalised a simple rule:
“Weak economy ≠ weak stock market.”
This post-pandemic cycle has repeatedly reinforced that idea.