Markets are near all-time highs. Corporate earnings remain strong. Unemployment is still relatively low. Household finances, by many measures, remain healthy.
Yet consumer sentiment recently fell to levels lower than during the COVID shutdowns and the Global Financial Crisis.
Does that make sense to you?
People are more pessimistic today than when a pandemic shut down much of the world and claimed millions of lives. They are more pessimistic today than when the global financial system was under severe stress and the S&P 500 lost more than half its value.
If consumer sentiment is supposed to reflect economic reality, something doesn’t seem to add up.
That raises an important question.
Does consumer sentiment still tell us anything useful?
At The Behavioral Finance Network, one of the recurring themes we discuss is that investors must be careful about the information they consume. Not every piece of data deserves equal attention. Some information helps us make better decisions. Other information simply creates more noise.
Consumer sentiment appears to be moving into the second category. Let’s explore.
The Strange Disconnect
Historically, consumer sentiment was viewed as a useful measure of how people felt about economic conditions. Extremely low readings often occurred during periods of significant market stress.
That relationship made intuitive sense.
When markets were falling, unemployment was rising, and uncertainty was high, people felt pessimistic. When conditions improved, sentiment improved as well.
But today something appears different.
Consumer sentiment has remained extremely weak despite:
- Markets reaching new highs
- Corporate profits remaining strong
- Continued economic growth
- Relatively low unemployment
If sentiment is supposed to reflect economic reality, why are people reporting such a negative outlook?
More importantly, why do they appear to feel worse than they did during some of the most challenging economic periods in modern history?
That simply doesn’t pass the common-sense test.
Has the Survey Changed?
One possible explanation is that the survey itself may no longer be measuring the same thing it once measured.
Historically, many consumer sentiment surveys were conducted over the phone.
Today, responses are gathered primarily online.
That may sound like a minor change, but it could have significant implications.
Think about where people spend their time online.
They are exposed to a constant stream of headlines, commentary, predictions, political arguments, economic warnings, and social media debates. Most of this content has one thing in common:
Negativity attracts attention.
The business model of modern media rewards clicks, engagement, and emotional reactions. Fear, outrage, and conflict generate far more engagement than calm analysis.
As a result, investors and consumers are often immersed in an environment that makes conditions feel worse than they actually are.
If someone spends hours consuming negative headlines and then receives a survey asking how they feel about the economy, their answer may reflect their emotional state more than the actual economic environment around them.
In other words, the survey may increasingly be measuring exposure to negative information rather than economic conditions themselves.
The Most Interesting Part of the Data
The chart below highlights something particularly fascinating.
While assessments of the national economy have deteriorated significantly, people’s views of their own finances remain remarkably stable.
In 2025:
- 73% of people said they were doing okay financially or living comfortably.
- Only 26% rated the national economy as good or excellent.
Think about what that means.
Many people believe their personal situation is reasonably good while simultaneously believing the broader economy is in poor shape.
This creates an interesting psychological disconnect.
People often feel better about their own circumstances than they do about everyone else’s.
One possible explanation is that individuals have firsthand knowledge of their own financial situation, but rely heavily on headlines and media coverage to form opinions about the broader economy.
And headlines are rarely designed to create optimism.
Does Consumer Sentiment Predict Anything?
For years, investors have searched for signals that might help them anticipate future market movements.
Consumer sentiment has occasionally been included on that list.
The problem is that a useful indicator should either:
- Confirm what is happening in the economy and markets, or
- Provide predictive insight into what may happen next.
Consumer sentiment appears to be doing neither.
Today we have extraordinarily negative sentiment readings alongside strong market performance.
At minimum, that should cause investors to question whether the indicator is still valid.
Just because something was a useful signal ten years ago does not guarantee it remains a useful signal today.
Markets evolve.
Technology changes.
Media consumption changes.
Human behavior adapts.
Indicators can lose relevance.
The Bigger Lesson for Investors
The real lesson is not about consumer sentiment.
It is about information.
Investors naturally look for signals that will help them feel more certain about the future. Unfortunately, many of those signals create more confusion than clarity.
Consumer sentiment may be interesting to observe, but there is little evidence that it currently provides meaningful predictive or confirming power for investors.
Instead of obsessing over every sentiment survey, headline, or forecast, investors are often better served by focusing on the things that actually matter:
- A sound financial plan
- Appropriate asset allocation
- Diversification
- Long-term discipline
- Managing their own behavior
Consumer sentiment may generate headlines.
But successful investing has never been about reacting to headlines.
It has always been about ignoring the noise.
Related: The 14% Problem: Why Investors Should Stop Trusting Market Forecasts