Data Versus Sentiment

Scott Poore, AIF^®, AWMA^®, APMA^®

June 05, 2026

There's a divergence between sentiment in the market and economic data. This could go down as one of the "least loved" bull markets in history. The view that things aren't so good from a quality of life perspective with soft economic data stands in stark contrast to equity markets making new all-time-highs and solid hard economic data. We seem to have a battle behind the scenes between two opposing forces. This week's musings are inspired by the 1984 movie "Red Dawn." Here is some trivia about the film:

The movie did reasonably well at the box office, earning $38.4 million on a budget of $17 million. A remake was released in 2012, starring Chris Hemsworth, but it was a box-office bomb earning only $51 million on a $65 million budget.
The original film has zero computer-generated effects and used no miniatures. All of the explosions during the battle scenes are real and of actual size.
The cast underwent an intensive eight-week military training course taught by real Green Berets.
The beginning of the film features the landing of 36 paratroopers from Cuba/Soviet Union. During filming, 5 of the paratroopers were blown as much as a mile off-course. Upon landing one had to convince locals that he wasn't really an enemy soldier.
An original trailer for the film included a scene where a tank rolls up to a McDonald's in town where enemy soldiers are eating. The scene was cut from the film due to a mass shooting on July 18, 1984 at a McDonald's in San Ysidro, California just a few weeks before the film opened.
Due to filming during the winter in the mountains of New Mexico, the actors had to adapt to freezing temperatures, often well below zero degrees fahrenheit.
Lea Thompson said many years later that this was the best time she'd ever had making a movie.

Here's what we've seen so far this week...

K-Shaped Economy or Sentiment? In the movie "Red Dawn," American civilians and military are at odds with foreign military units, primarily Russia and Cuba. It would seem the same could be said about consumers in the U.S. economy. Much has been made of a "K-shaped" economy in the U.S., but it could be argued that there's really a K-shape to sentiment and behavior. According to the the RCM/TIPP Economic Optimism Survey¹ and University of Michigan's Consumer Sentiment Survey², the current economic picture is worse now than in market sell offs over the past few years. The current levels of the RCM/TIPP and UoM surveys are 42.5 and 44.8, respectively. Those readings are lower than July of 2020 (COVID) and April of 2022 (bear market). The "soft" data suggests that the economic and market picture is bleak - bleaker than the shutdown during COVID and the equity decline in 2022. However, an examination of "hard" data suggests otherwise. The unemployment rate (4.3%), while slightly elevated versus 2022, is far less than the whopping 14.8% near the peak of COVID.³ Inflation is higher (+3.8%) due to the Middle East conflict, but far less than April of 2022 when inflation reached +8.3%.⁴ Inflation is being affected in part by higher gas prices ($4.20/gallon), but that level is nearly the same as gas prices in April of 2022.⁵ Yet, consumer spending, as represented by Redbook Sales, is +9.0% year-over-year, which stands in stark contrast to declining consumer sentiment in the surveys.⁶ Corporate earnings are higher and gross domestic product is growing. Meanwhile, markets are making new all-time-highs, while survey respondents are bearish. The reality is that a considerable disconnect exists between surveys that could be either oversampling negative consumer viewpoints or the respondents themselves possibly providing answers that might reflect their feelings, while their actions are completely different. Regardless, the current market could be described as one of the least-loved bull markets in quite some time. The hard data as measured by the Chicago Fed's National Financial Conditions Index (adjusted for inflation) and the St. Louis Fed's Financial Stress Index are both below zero, meaning that financial conditions are loose (or, good).⁷⁸ Neither index is above zero, meaning conditions are poor, like they were in 2020 or 2022. As a result, investors should feel better about the hard economic data than the soft data represented in the economic surveys.

Most Hated Bull Market? One of the tragedies in "Red Dawn" is that a bunch of high school kids have to grow up faster than they should in order to survive. At one point in the film, a rescued colonel tells one of the young boys, "All that hate's gonna burn you up, kid." To which the kid responds, "It keeps me warm." While survey respondents may say they are bearish and fear the markets, the fact is their ownership of stocks indicates otherwise. Even for the bottom 50% of U.S. households, net worth is the highest today than in more than two decades.⁹ While the upper 1% of households have certainly grown at a faster pace, the bottom 50% have still participated in the market's growth. In addition, stock ownership shows that feelings on the economic backdrop are quite different from investors' participation in the market. According to the latest Gallup survey, more U.S. households (62%) own stocks, the highest in the past two decades.¹⁰ One would think that survey respondents who were unhappy with the economy would be selling stocks. This data is contrary to pundits pounding the table about a K-shaped economy. Certainly, there are fewer stock owners in the lower-income category, just as lower-income households are feeling the crunch of inflation and gas prices more than middle-to-upper income classes. However, the Redbook Sales previously mentioned, also include a calculation of spenders among different income levels. The 9,000+ retailers tracked in the Redbook Sales include stores commonly trafficked by lower-income households. Lower-income households make up at least 30% of U.S. households¹¹ and that income group is picked up in the broad swath of the retail sector captured in the Redbook Sales representing over 80% of the dollar value in the official U.S. Census.¹² The reality is that the U.S. consumer, at least for the moment, is healthy and spending at levels associated with a strong economy. On Thursday Kansas City Federal Reserve president Schmid stated that the U.S. economy is in "solid shape."¹³ Because the economy is on solid footing, equity markets are doing something they haven't done since at least 1950. Equity markets aren't acting like it is a mid-term election year. Based on the graphic, the historical average return of equities for the 2nd quarter of a mid-term election year is -2.3%. This year, equities in Q2 are higher by more than 16%, so far. Today's Jobs Report showed that the economy added 172,000 jobs versus only 85,000 expected.¹⁴ If the U.S. economy is on solid footing and equity markets are still making new highs, perhaps the gloomy consumer sentiment feeling represented in the surveys is not really in line with the data. Investors would be wise to keep their asset allocations consistent with their reasonable risk tolerance and allow the current market environment to work in their favor.

Click here to see the original trailer with the McDonald's scene later removed from the film...

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