Monthly Outlook: May 2026

Markets have traded like a yo-yo for the past two months, with the S&P500 index down 4.9% in March and up 10.5% in April, closing at new all-time highs. Other markets like the NASDAQ 100, and the INTL index, are trading in the same way. If it feels like a little déjà vu to last year’s Mar/Apr, that’s because it looks similar. Last year, we had the Trump tariff plunge & recover. This year, I guess we can call it the Iran war plunge & recover.

As long-term growth investors, we’re not really used to such volatile geopolitical policy changes. But I would say that markets and investors aren’t nuts, they’re just efficiently and quickly pricing in the data as it comes in. Markets just reflect reality, volatile as it is.

With global stock prices trading at new highs, investors should be happy about the sizeable portfolio gains. And I suspect, most are. Why, then, are Consumer Confidence readings at 50-year lows? How can we have the best of times and the worst of times, at the same time?

Consumer Confidence, Why So Glum?

There are two established consumer confidence indicators, one from the Conference Board and one from the University of Michigan. They differ a little in their methodology, but both show the same pessimistic mood. The Conference Board focuses more on employment and labor, while the U-Mich poll asks more about household finances, inflation, and employment from the business owners’ perspective.

The U-Mich Sentiment Index came in at 49.8 this month, its lowest reading in 50 years, and at levels only seen during the past seven recessions. Similarly, the Conference Board Consumer Confidence Index is 92.8 in April, and is lower than readings that preceded 4 of the last 7 recessions. The point is the consumer, let’s call them “Main Street,” isn’t feeling the same exuberance that investors, or “Wall Street,” are enjoying.

Wall Street vs. Main Street

The key to understanding how we can have investor exuberance and sagging consumer confidence is realizing that these are two disparate groups, for all intents and purposes. The top 10% of US households own about 67% to 87% of the country’s wealth and assets, depending on the study. And, with new all-time high stock prices and buoyant house prices in the best neighborhoods, this Wall Street group is feeling pretty good. The Main Street group doesn’t have enough investments to meaningfully participate in the markets. Instead, they’re impacted by the general economy, especially the jobs market and inflation.

Today, unemployment is about 4.3% and has been creeping higher from the low of 3.4% two years ago. It’s not that high, but it’s going in the wrong direction and that can make workers anxious. Official inflation readings, including CPI and PCE, show that inflation rose to about 9.2% in 2022 and has been coming down to about 3.3% lately.

There are two points to make about these inflation readings. First, prices are still inflating from an already high level, they’re just inflating more slowly now (3.3%). Second, CPI and PCE measure inflation using prices of a broad “market basket” that includes rent, gasoline, basic groceries, pet food, haircuts, etc. This may be a good measure of basic items, but doesn’t really measure the lived experience of most consumers. For them, the prices of houses, health care and health care insurance, childcare, travel, restaurants, and college tuition are what matter and the price inflation of these categories is likely much higher, perhaps in the 10%/year range. That’s enough to make consumer confidence sag, for sure.

Investing For Wealth, Not Just More Dollars

Typically, investors and consumers have similar outlooks. When the economy is good, corporate earnings rise and stock prices rise. When companies are growing, more workers (who are also consumers) are employed and well paid, and can afford a decent lifestyle. But today, this balance is off. This is telling us something.

We need to consider how inflation that concerns consumers may be one side of a coin; the other side may be silent devaluation of the $US dollar. This duality should concern investors. Therefore, we are investing some funds in non-dollar assets and real assets to manage real wealth.