Sentiment, Confidence, and Expectations: The Latter Is Down

U.Michigan client sentiment and Convention Board financial confidence rise. However expectations drop.

Determine 1: College of Michigan Shopper Sentiment (blue, left scale), Convention Board Financial Confidence (tan, left scale), and Gallup Financial Confidence (inexperienced, proper scale). Supply: U.Michigan through FRED, Convention Board, Gallup. 

Present situations had been up partly due to the impetus to purchase now to keep away from future tariffs.

Apparently, expectations as measured by U. Michigan have dropped, attributed to anxiousness concerning the results of tariffs. Nonetheless, Republicans/lean Republican have seen their expectations soar, whereas Democrats/lean Democrats have seen the reverse (as occurred, in reverse, in 2020).

Determine 2: College of Michigan Expectations (daring black), expectations of Democrats/lean Democratic (blue), expectations of Republicans/lean Republican (purple). Supply: College of Michigan, FRED.

The Convention Board expectations index additionally evidenced a drop:

Supply: Convention Board.

The Convention Board’s observe on the December outcomes included:

In write-in responses about components affecting customers’ views of the financial system, mentions of politics—together with the end result of November’s elections—continued to rise. Mentions of tariffs additionally elevated in December. Notably, a particular query this month confirmed that 46% of US customers anticipated tariffs to lift the price of residing whereas 21% anticipated tariffs to create extra US jobs.

Actually, uncertainty has elevated because the election, relative to the current previous.

Determine 3: EPU (blue, left scale), EPU centered 7-day shifting common (pink, left scale), and VIX (inexperienced, proper scale). Supply: EPU, CBOE through FRED, writer’s calculations.

Folks voted for this (nicely, a minimum of a plurality did), so right here we go…