Consumer confidence hit a historic low — but stock markets are rallying. Here’s why the data may be wrong

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The average American doesn’t likely need a report to tell them that the public isn’t feeling great about the state of the economy right now, but new data about citizens’ general sentiment paints an even more dismal picture than expected.

Since 1952, the University of Michigan’s Institute for Social Research has administered a monthly survey to gauge consumer confidence, putting a number on the nation’s attitude toward finances and spending, the general economic landscape at the time and expectations for the future.

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This year, June’s results were the lowest they’ve been in the study’s recorded history, coming in at 49.5 (1) — lower than during the worst of COVID-19 (when the index reached 71.8), the midst of post-pandemic inflation (when it dropped to 50) and after the peak of the Great Recession (when it measured 55.3).

But how is this figure possible when stock markets have been rallying to record highs (2) and spending across the country continues to show similar vigor (3)?

Where the math isn’t showing the whole context

The Michigan Consumer Sentiment Index (MCSI) is widely considered to be not only a credible metric but also one of the nation’s key economic indicators (4). However, in this case, it seems to be at odds with other comparable and contextual data.

Regardless of what letter shape you believe the economy is taking at the moment — K or E (5) — consumer spending levels are strong and escalating (6), up 0.9% month-over-month in May (the fourth monthly increase in a row) despite prices being up 4.2% year-over-year in the same month (7).

Yes, the difference in spending (and earnings) between classes is becoming more pronounced (8), which isn’t exactly an uplifting phenomenon. Individual debt is also high (9), and so are private-credit default rates (10). And amid all of this spending, the average personal savings rate has fallen to 3.0% (11), a figure that is the worst since 2022.

But, it’s also worth taking into account that the U.S. presently has more retirees digging into savings than ever (12), which impacts the data. Additionally, people actually have more liquid assets than they did pre-pandemic, amounting to about 84% of their disposable income.

Meanwhile, other respected confidence benchmarks, like the one published each month by The Conference Board, have yielded much more positive results than the University of Michigan’s index. The most recent edition of that survey appraised consumer opinion at 91.2 (13), which marks a slight increase from the month prior, and remains around the overall historical average.

That analysis, released in late June, cites “slightly more positive” feelings about business conditions, but consumers “anticipate little change in the labor market six months from now.”

RIA Advisors partner Lance Roberts also recently pointed out (14) that the hard economic data beyond consumer appetites and attitudes tells “a third story entirely,” with retail sales, corporate earnings, GDP growth and S&P 500 performance all on the rise. Part of this can be attributable to the arguably delusional AI boom, but at large, consumers’ Michigan survey responses don’t match what is actually going on.

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Could methodology be partly to blame?

Some have argued that the university’s choice to shift polling from over the phone to online in 2024 has skewed results negatively (15), as respondents generally prove to provide less rosy answers in online settings (16). But, given what research says about how polling modes impact responses, recent years’ results should actually be more truthful, as phone interviews, by nature, can prompt people to respond in an overly agreeable way (17).

“Surveys and behavior often part ways, and the gap usually tells you more about the survey than about the consumer,” Roberts stated (14) in his evaluation. “The labor market, spending, earnings, and credit data all line up in the same direction. They don’t agree with the sentiment survey, but they do agree with each other.”

Beyond the change in methodology, Roberts also identifies another glaring factor: people’s vehement opposition to the “current presidential administration,” whether blind or warranted.

As outlined in earlier research regarding the differences in sentiment across political affiliations, he asserts that “the partisan gap in sentiment is now larger than the gaps by income, age, or education combined … [so] the survey isn’t measuring the economy. It’s capturing tribal loyalty, and that mechanic is a meaningful slice of the consumer sentiment disconnect we’re trying to explain.”

Hedge your portfolio against market risks

Markets have proven remarkably resilient this year, but cracks might be beginning to show beneath the surface.

Stocks have held up surprisingly well this year, brushing off concerns about the conflict in the Middle East and delivering stronger-than-expected gains. But the mood has started to shift. Softer economic data and renewed concerns over inflation have sparked a pullback — particularly among large-cap technology stocks that have led the market’s rally.

That caution comes as inflation climbed to its highest reading in three years during the month of May (7). The hotter-than-expected data has prompted the Federal Reserve to shelve earlier expectations of interest rate cuts, with some analysts now warning another rate hike could be on the table (18).

That’s significant because higher interest rates increase financing costs for companies — especially large tech firms investing billions into AI infrastructure. If borrowing becomes more expensive, those lofty growth expectations could come under pressure.

The silver lining? Diversifying into assets that don’t rise and fall alongside stocks can help reduce overall portfolio risk and cushion the impact of market swings.

Investing in gold

Gold has been a go-to defensive asset for generations because it tends to hold its value during periods of economic uncertainty. Unlike stocks, which can react sharply to earnings disappointments or shifts in investor sentiment, gold is often viewed as a store of value when confidence in financial markets weakens.

Some of the world’s most successful investors agree. Billionaire investor Ray Dalio has long argued that gold deserves a permanent place in a diversified portfolio.

“One should have between five and 15% of their portfolio in gold because of the fact of how it works with the other components,” Dalio claimed on an episode of the All-In Podcast (19).

One way to invest in gold that also provides significant tax advantages is to open a gold IRA with the help of Priority Gold.

Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, which combines the tax advantages of an IRA with the protective benefits of investing in gold, making it an attractive option for those looking to potentially hedge their retirement funds against economic uncertainty.

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Branch out to real estate

Gold isn’t the only asset that can help weather market turbulence. Real estate has also long been considered an effective hedge because housing prices don’t move in lockstep with stock prices.

Real estate can hedge your portfolio against inflation, since higher construction costs, rising land prices and increasing rents often translate into higher property values and rental income over time.

The good news is that investing in residential real estate no longer requires taking on a mortgage, saving for a large down payment or managing tenants.

That’s where mogul comes in. This real estate investment platform offers fractional ownership in blue-chip rental properties, which gives investors monthly rental income, real-time appreciation and tax benefits — without the need for a hefty down payment or late-night tenant calls.

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Diversify your real estate portfolio

For those with more capital on hand, they have other options. For instance, you could leverage multifamily real estate investing. In a report prepared by JPMorgan, Al Brooks — the firm’s vice chair of Commercial Banking — said, “I think multifamily housing is absolutely where you want to be as an investor (20).”

Accredited investors can now tap into this opportunity through platforms such as Lightstone DIRECT, which gives accredited investors access to single-asset multifamily and industrial deals.

Lightstone DIRECT’s direct-to-investor model ensures a high degree of alignment between individual investors and a vertically-integrated, institutional owner-operator — a sophisticated and streamlined option for individual investors looking to diversify into private-market real estate.

With Lightstone DIRECT, accredited individuals can access the same multifamily and industrial assets Lightstone pursues with its own capital, with minimum investments starting at $100,000.

A finer alternative for your portfolio

Although the major indexes have rebounded from recent volatility, concerns remain that U.S. equities are becoming increasingly expensive. The Shiller P/E ratio has climbed above 40 — a level not seen since the era of the dot-com bubble.

Goldman Sachs CEO David Solomon echoed those concerns, warning that markets could experience a correction of 10% to 20% over the next couple of years (21).

That’s why many wealthy investors don’t rely exclusively on stocks. Billionaires like Jeff Bezos and Bill Gates continue to invest heavily in equities, but they also carve out a portion of their portfolios for assets that behave differently from the market.

Post-war and contemporary art is one alternative. The asset class has outpaced the S&P 500 by 15% from 1995 to 2025 while showing near-zero correlation to traditional equities.

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Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

University of Michigan (1); ABC News (2); The Washington Post (3); Advisor Perspectives (4),(6); Fortune (5); U.S. Bureau of Labor Statistics (7); Morningstar (8); Federal Reserve Bank of New York (9); Bloomberg (10); Federal Reserve Bank of St. Louis (11); The Economist (12); The Conference Board (13); Seeking Alpha (14); Barron’s (15); Briefing Book (16); Gallup (17); Financial Times (18); @allin (19); JPMorgan Chase (20); CNBC (21)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.