MP018: Consumer Sentiment and the Stock Market with Jason Ranallo

When people feel the worst about the economy, that’s often when markets perform their best. Strange, right? But this is one of the fascinating dynamics we see when we dig into consumer sentiment—a gauge of how people feel about the economy.

The March preliminary Consumer Sentiment Index slumped 7 points to a lower-than-expected reading of 57.9. This was the third consecutive decline, bringing sentiment to its lowest level since 2022. The sharp deterioration is historically consistent with a slowdown in economic growth, as consumers typically pull back on spending.

Historically, when consumer sentiment is at its lowest, the stock market tends to rally—often strongly—over the next 12 months. In fact, the average return for the stock market following sentiment troughs is just over 24%, compared to just 3.5% after sentiment peaks.

Why this disconnect? While current concerns about inflation, layoffs, and geo-politics are valid, financial markets are forward-looking. Markets are not only reacting to today’s emotions—they’re also trying to price in tomorrow’s outcomes. Periods of extreme pessimism can signal opportunity for long-term investors.

In this video podcast, we explore how sentiment acts as a contrarian indicator and how investors can respond. Rather than predicting the bottom, we emphasize having a plan, a diversified investment approach, and the ability to take action.

Take aways: • Consumer sentiment can be a contrarian indicator • Markets are forward-looking. • Intra-year market declines have averaged -14% (yet finished positive a favorable 75% of the time)

Worth noting past performance is no guarantee of future results. We zoom out for context and understanding. 

If this market update has got you thinking about someone you care about or your own financial plans—we’d love to hear from you. You can reach out to us directly or through our website to schedule a conversation.

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Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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