Consumer Sentiment: The University of Michigan index is near record lows, driven by affordability concerns, tariff fears, and weakening labor market expectations.
AI Theme: Markets are pricing significant AI-driven growth while consumers remain focused on pocketbook issues; the sentiment impact hinges on AI’s effect on employment.
Bitcoin Exposure: Sponsor Matador Technologies (MATA.V, MATF) is pitching a Bitcoin-first treasury strategy, backed by a secured convertible note facility targeting up to 6,000 BTC by 2027.
Market Divergence: A notable gap exists between rising equities and falling consumer sentiment, with stock gains buoying higher-wealth households but not the broader public.
Spending Outlook: Consumers broadly view big-ticket purchases as unattractive due to high prices and borrowing costs, signaling risk for durables and autos into the holidays.
Income and Jobs: 29% report weakening incomes and 71% expect higher unemployment, elevating risk to consumption and reinforcing cautious household behavior.
Policy Risks: Tariffs and the government shutdown weighed on sentiment; potential one-time $2,000 dividends may lift sentiment more than sustained spending.
Fed Path: Policymakers face rising downside risks to employment versus persistent inflation concerns, implying a difficult balancing act for rate decisions.
Transcript
71% of consumers expecting unemployment rates to go up in the next year. When we ask consumers about their potential for you or your spouse to experience job loss in the next 5 years, that is extremely elevated. For people who do not participate in stock markets, their sentiment has just continued to decline. For folks with smaller portfolios or no portfolios at all, they don't have the portfolios to help them enjoy the gains from from the stock market. Stock markets are are really putting a a lot of value on the potential for AI to drive the economy. That's not something that consumers are optimistic about or they're not thinking about it at this time. >> I'm pleased to welcome back the show Joanne Shu. She is the director of the service of consumers and research associate uh professor at the University of Michigan and uh she and her team are responsible for putting together the consumer sentiment index that economists and investors alike regularly follow uh that's published by the University of Michigan. Welcome back to the show Joanne. Good to see you. >> Thanks for having me. it has come to our attention that the consumer sentiment has hit uh near record lows and let me just show a uh chart here um that's on the homepage the uh consumer sentiment of Michigan index we have here uh the latest data point much lower than where it was couple we I we had you on the show 3 to four months ago and back then it was around here so it had shown slight improvements since the bottoming of um of of sentiment in April 2025 But it's now reached even below that level. And just looking at the broader chart here, if you zoom out, you can see that when the baseline was around 100 back in 2017 2019, um we're about half of that right now. So can you just comment on the most recent decline and more broadly why consumers today in 2025 feel so much worse about the economy than even six, seven years ago? Uh first of all, let's kind of recap where where uh where we were the last time um I was on. So essentially sentiment had bottomed out in April and May of this year uh concurrent with the uh announcement of the so-called reciprocal tariff regime. Um and consumers at that time were pretty shocked by just how high the tariffs came in and they were broadly uh bracing for a worst case scenario. Um in the months um over the summer started to feel a little bit better about the economy. That's the uptick that you see um over the summer um because uh you know tariff rhetoric started to calm down a little bit. There were fewer announcements of of tariff hikes and um and so consumers started to uh breathe a little bit of a sigh of relief. But the thing is since then consumers are just not confident that um inflation is going to uh isn't going to come back. um even though they're not really bracing for a worst case scenario anymore, they're looking around them um and they're feeling very precarious about inflation coming back and also importantly very precarious about labor markets. So they their number one factor on their minds right now is affordability, cost of living and they're feeling pressure on both sides of that both the income side as well as the expenditure side. Also during uh the government shutdown, which uh by the way ended last uh last week, um SNAP was put on pause and um it's a supplemental nutritional um assistance program and we we we have a number of Americans taken off the program, but I think it's going to come back. Correct me if I'm wrong. And I I think I I was just reading this morning a lot of people have to reapply and I wonder how much of that contributed to the worsening sentiment. >> So in October we didn't and and which was when the uh the the shutdown started in the beginning of the month. We didn't really see a whole lot of spontaneous mentions about the government shutdown in October. Consumers really weren't connecting the shutdown to the economy. They were really primarily concerned about uh prices and and incomes. November, as of November 7th, our most recent data release, um prior to the end of the shutdown, uh the story was very different. Uh the share of consumers spontaneously mentioning the shutdown quadrupled between October and November. Um about 10% ultimately, which is about what we saw in 2019 after a month of that particular shutdown. And so it was definitely something that was on people's minds. Um as you can see, October sentiment was already pretty low, so it didn't really push things much further lower in November. it was already low to begin with. So, it definitely contributed to the no to the continued downtick in um in sentiment, but it's not the primary reason sentiment is low right now. Um so, I mentioned 10% of people um spontaneously referencing government shutdown in the first half of November. Uh contrast that to u almost 60% of consumers continually continue still talking about um about tariffs. Uh so that's just down just a little bit from the peak of 65 66% that we saw earlier in the summer. Um but consumers continue to be quite worried about tariffs particularly and how it's going to pass through to prices and a potential weakening in business conditions. >> Are you concerned about um weak spending into the Christmas holidays? >> What is very clear in our data is that consumers don't feel confident right now. They don't feel like they're thriving. And when we ask about major purchases like um like cars or durable goods, consumers are telling us it's a terrible time to buy those things. Um so they don't not only do they feel like prices are too high right now, um they don't feel like it's a good time in the economy, a good time for their personal finances to lock in several years of of installment payments. Um that being said, uh holiday shopping is typically not quite so big ticket. Um, so consumers may, even though they're unwilling to make these major purchases like a new house or a new car, uh, they may be willing to um to spend some money on on lower uh on lower cost items. Um, particularly those who have not actually yet experienced a reduction of their incomes. Um but we have um as of preliminary in November data we had a pretty strong surge in the share of consumers telling us that weakening incomes were uh were dragging down their personal finances. Uh last month it was only 20% of consumers. This month it was about 29. So that is a very sharp increase. It's still not a majority of consumers who are telling us their their incomes are weakening. But that is um you know that's a sizable group that can't really can't really be ignored. Um, yeah. >> Which group is that, Joanne? Uh, because I'm looking at the Atlanta wage tracker, and even though it wage growth is stagnating, it's not declining significantly this year. >> Well, weaker weaker incomes can come, it can happen in a few different ways. It could be um that someone lost their job or their job they couldn't find a new one or their unemployment insurance benefits ran out because they've been unemployed for a very long time and can't find a new job. So, it's not necessarily that you are your household that that you got a pay cut at your specific job because these are being measured at the household level, you and and your spouse. Um and um and part of this could could be also related um to this idea of the SNAP benefits that you mentioned before. If consumers are anticipating that benefits that used to be there for them are no longer going to be there for them, um it could uh this could be part of this idea of weakening incomes generally. >> Before continuing with the video, let's talk about today's sponsor, Manador Technologies. That's ticker MATA.V on the TSX Venture Exchange and the OTC market MATF. Matador is a Bitcoin ecosystem company that uses Bitcoin as its primary treasury asset while building products around the Bitcoin network. They recently closed the first 10.5 million US trench of a secured convertible node facility that can go up to a hundred million in total. This capital is dedicated solely to purchasing Bitcoin for their balance sheet. The nodes mature in December 2027 with interest of about 8% which drops to roughly 5% if they uplist to a US exchange. Their target is to eventually reach around 1,000 bitcoin by the end of 2026 and expand to approximately 6,000 bitcoins by 2027, aiming to eventually hold close to 1% of the total bitcoin supply. You can check out the link in the description down below or scan the QR code here to learn more about Matador and its Bitcoin first approach. Remember that's Matador Technologies trading on the TSXV under MATA.V and on the OTC MATF. Going back to earlier statement about how people are putting off big ticket purchases. If the underlying well I guess if if they're putting off purchases now is the underlying assumption that these things cars, refrigerators, big appliances they will decrease in value or at least inflation will stall sometime in the future. Um otherwise if people expect prices to get even higher maybe they'll be buying now. Right. So um can you evaluate that assumption and do you agree with that? >> Sure. But what you're talking about is this idea that inflation expectations can become a self-fulfilling prophecy. And when people feel confident about their incomes, um that is more likely to be true. If they feel like they have the incomes to cover, you know, 3 years worth of car payments, two years worth of a worth of a loan or or whatever that big ticket item item is, then yes, they they might um subscribe to inflationary psychology and try to avoid that price increase by buying. Now what's different about the current moment is that people just don't feel confident about their incomes. So for them take making a big ticket item a big ticket purchase even if it might allow them to avoid high higher prices in the future uh doesn't really feel prudent to them and that's what they're telling us. Um now I will say that inflation expectations have come down quite a bit over the last few months. Still much higher than we were the even at the beginning of the year and and and a year ago as well. Um, so consumers again are not no longer bracing for the worst case scenario with inflation that they were expecting back in April and May, but they they still do broadly expect inflation to coming to to come back. Um, but even so, I think they just don't have the uh confidence in their incomes. And it's not just the share of people telling us that weaker incomes are driving down their personal finances. when we look at labor market expectations, um we have 71% of consumers expecting unemployment rates to go up in the next year. So that's prospective. These are expectations, not not talking about right now. And maybe that's not a problem if um if you think you know unemployment is going to affect other people, it's not going to affect me. But when when we ask consumers about their potential for job loss for you and your you or your spouse to experience job loss in the next 5 years, that is extremely elevated. Uh and when we ask specifically about either nominal incomes or real income growth, a growth in both of those dimensions, that's extremely weak right now. Um nominal income growth has been fairly steady but steady at very very low anemic levels. Um so broadly speaking, you know, we have 29% of consumers telling us that their incomes are already pretty weak now um and are dragging down their personal finances now. And then we have a lot more consumers telling us they're expecting things to get worse going forward. Okay, I'm going to show you a chart here. This is the um consumer sentiment index once more uh just graphed here on Trading View um like we discussed nearrecord lows. Now, uh the line is in red. I'm going to overlay this with the S&P 500 uh which will be the blue line. Now, it's not a perfect relationship, of course, but if you zoom back, you can see that throughout periods of history, they've been kind of moving roughly in the same direction. Whenever consumer sentiment um is weaker uh the stock market tends to have fallen um kind of like acting as a coincident indicator almost and this has been persistent. See I'm looking at 2014 to 2020 uh 2020 uh was a was co so that that was a big drop there in both the stock market and sentiment. What happened now? See the blue line continues to move up higher and then there's this big divergence here and it it's more apparent in the last couple of months. So either the stock market is completely out of whack or consumer sentiment is going to snap back. Why is this happening? >> Well, it's very clear that stock market participants generally and consumers have completely different interpretations of what the impact of tariffs are going to be um on on the economy or or put it another way, the relative impact of tariffs versus AI. AI is not something that consumers are are bringing up on their own as a possible support for the economy in the future. They're not really focused on that. they're really more focused on pocketbook issues. Um, when you drill down with consumer sentiment on different parts of the economy, um, you know, in November, uh, sentiment declined for pretty much every demographic group. The one exception were were consumers with the largest third of stock holdings. So, consumers with the largest stock portfolios, their sentiment actually increased 11% in the beginning of November. Um so these stock market gains um so so first of all higher income higher wealth people are enjoying the stock market gains that is supporting their their sentiment um a bit uh they're really the only ones who sent whose sentiment has really increased since that bottoming out in April and May for people who do not participate in stock markets their sentiment has just continued to decline um and for folks with smaller portfolios or no portfolios at all they're they're focused on stock uh on pocketbook issues income um inflation and but they don't have the portfolios to help them enjoy the gains from from the stock market. Um so I guess that's the causal chain and going in one direction and the other is again stock markets are are really putting about a lot of value as I understand it um on the potential for AI to drive the economy. That's not something that consumers are optimistic about or they're not thinking about it at this time. If I pull up a chart of a even longer um time frame, this goes back all the way to the beginning I believe of the data collection 1960s and you can see how right now was currently at or near the level of 1981. There was a recessionary gray bar there and we had very very high inflation. In fact, Vulkar was just in the middle of raising interest rates to double digits to combat very high inflation. It seems like consumers are very much concerned about inflation and of course a recession in the late '8s was both or early 80s rather was both. Right now we have nowhere near levels of 18 1981 um inflation and it doesn't look like Ember has designated this a recession. So it seems a little bit different. Uh one way to look at is consumers are overreacting. But I'll let you react. >> Consumers again are just really focused on pocketbook is issues right now. So it's not just inflation but also high prices. What we saw in the period uh you 2022 to 24 period uh consumers were fully aware that inflation was slowing. Um we could see that very clearly in the downward trend in their inflation expectations but at the same time they were continued to be very very frustrated by the persistence of high prices and that's still that's where we're at right now. Um we have I think it's about 48% of consumers so almost half of consumers um mentioning that high prices were dragging down their personal finances. So that's that's a lot. I mean, they're they're perfectly aware inflation isn't where it it was a few years ago. Um, and of course, we know that inflation now or inflation even in this post-pandemic period is still lower than it was in the 70s and 80s. Um, but consumers are are just really frustrated by what's going on. Um, at the same time, I think it's really important to note um the very different contextual societal context now versus, you know, 40 40 plus years ago. Um so when we look at the share of consumers you know telling us news about inflation um you know we ask people what news have you heard about business conditions about the economy and then we ask you know positive or negative and then we asked them what have you heard the share of people saying they heard negative news about inflation in the post-pandemic period was so much higher than it was in um in the 70s and 80s. Uh the information news environment is vastly different. You know, back then people were getting their news from the same places, the same evening news, the same radio, um the same newspapers, um and now we just have u a news cycle that's 24 hours. Um people are all consulting different different types of information, not to even mention social media and um and social media algorithms serving you up a lot of information. So the tenor of news about inflation is totally different now than it was before. Um, so it's I think it shouldn't be that much of a surprise that consumers are reacting to these realities in different ways. >> Is this a K-shaped economy right now? Do you have data on whether or not the um people of the higher income tiles are reacting differently or have different sentiment? >> We are absolutely seeing that higher income, higher wealth consumers have more favorable levels of sentiment than um than folks at the bottom of the income distribution. And this is especially clear in the last uh 6 months or so. Is this divergence normal, Joanne? >> It is typical that there is an income or wealth gradient and that gradient closed that gap closed completely in April and May of this year with the tariff situation and I'll note again it closed in the middle of 2022 also when um inflation hit its peak. So during those two periods uh June 2022 and June 2025 so almost exactly three years apart all um high and low income high and low wealth those groups converge in sentiment um um and in the period following 2022 um all the gains and sentiment were really concentrated at the top of the income and wealth distribution. So you could see a case K shape then as well. Um, and I think that's very consistent with the fact that consumer spending remained so strong in the post-pandemic inflationary period even though sentiment was really low. The people who generate the lion share of aggregate spending, they their sentiment was fine. Um, the wealth gap and sentiment actually grew during this grew by 2024. Now again that gap collapsed when the tariffs were implemented and I think consistent with this uh this general state of of uncertainty around what these how these tariffs were going to land if they were going to stick and what it was going to how it was going to pass through to the economy. Um everyone across the wealth spectrum um braced for a worst case scenario in in April and May. Since then, sentiment is slowly recovering um on an upward trend for folks with uh high incomes and large stock portfolios and it's just continuing to um to >> This is an interesting piece of news I want to get your reaction to. So, it seems like it's not just people in the lower income um bracket that's spending less. Apparently, according to the CBC article, uh the wealthier are also spending. from McDonald's Savers Value Village companies are reporting that highincome shoppers are turning into deal hunters. I'm not sure how they gather data that their customer at the cashier line is a high income earner. But anyway, um let let's let's just keep going here. Um for roughly 2 years, executives have warned investors that low-income consumers were spending less dining out less frequently and growing picky about their shopping. Now, there are more signs that highincome shoppers are watching their budgets, too. The theory here is that high-income shoppers typically lead consumption and so if they're spending less, maybe that's a sign of a broader slowdown. Are you seeing any evidence of this? Are you asking people um high-income earners through surveys, for example, how they're spending their money? >> Uh we are not specifically asking questions about um broad questions about spending. We're asking about spending intentions for these big ticket items. And for the big ticket items, no one thinks it's a good time to buy. uh people think across the income distribution believe that prices are too high and borrowing costs are too expensive. Um and while I have mentioned that sentiment has lifted for these high-income high wealth consumers in the last few months, they're still not in favorable territory. They're still in, you know, generally dower views of the economy. Um so they are definitely more confident about their incomes and their wealth than um than people at the lower end of of the spectrum. So they have stronger expectations. Um but they still don't feel great about the future of the economy. Um so it wouldn't surprise me at all if they are trading down what they're spending. Um I mean I don't know that they're necessarily I would expect them to massively cut back on their total spend. Um but it would um be consistent with our data if they were choosing uh to to look for more bargains um or substituting away um away from more expensive goods. >> So let's close off on what's ahead here. So, $2,000 dividends are what uh the Trump administration is proposing. Treasury Secretary Scott Basent told uh reporters that uh it'll most likely be given out to families making less than let's say $100,000 a year in income. Um given that the government shutdown is now over and given that this proposal is now gaining steam, although it hasn't actually been enacted yet, what do you expect consumer sentiment to do in the next coming months? >> Consumers perceive a lot of uncertainty in the economy right now. So, I I think at this point um they may be less likely to react quickly to a policy announcement. Um and they might wait until the policy actually hits. Um they reacted so quickly to the uh the April uh Rose Garden tariff announcements um which you know they um recalibrated it took a couple of months to recalibrate their expectations in light of how things actually unfolded. um that you know I think consumers are going to really wait and see whether not not whether or not that money actually hits their pockets and if it does I do think it will provide some support to um to to consumer sentiment um because you know that that is something that is that directly addresses their their pocketbook um their pocketbook concerns that they've been very loud and clear about. Well, is it true, Joanne, that even with a one-time stimulus, consumer um spending habits wouldn't fundamentally change because people know it's one time? I mean, I would only go out and eat more, eat at restaurants more frequently, or buy things more often if I know my income overall is going to be sustainably higher, not just because I'm receiving a one-time $2,000 check. >> That's that that's right. So, what I'm saying about a boost to sentiment is really about their feelings about the economy and not necessarily their spending. Um there's been quite a bit of academic research about what people do with a one-time windfall. Um and and you know, they'll they'll spend some of it, but they'll save some of it and they they'll use some of it to pay down debt. If this is really going to um to lower income consumers, um we know that lower that that consumers with lower incomes um they have, you know, debt burdens and we know that, you know, debt delinquencies are um are a sign of vulnerability. So, a lot of these lower-income people have a a decent amount of debt load, and it wouldn't surprise me if much of that money went there rather than to actual spending. >> Finally, let's touch on the labor market and the Federal Reserve. So, we have here reports that the unemployment rate likely increased 4.4% in September. The labor market is showing signs of significantly weakening. We've discussed that briefly already. Uh, what do you think the Federal Reserve is going to do in response? There's now uncertainty as to how many rate cuts they will actually enact going forward given that inflation is also rising. Uh and we have a few denters in the Fed already and we have uh uh Fed President uh vice Fed vice chair Jefferson stating that downside risk to employment um has increased compared to upside risks to inflation which is a very important statement because they have to balance both. What do you think is their next step? >> What what I would do to be a fly on the wall for the next FOMC meeting um I don't envy envy these policy makers. They have a tough path ahead of them. You know, I think the key thing is is one thing that Cher Powell's been mentioning a lot. There's no risk-free path. Um there are risks on both sides of of the the dual mandate. Um and looking at the the consumer sentiment survey, you can see evidence for both of those risks very clearly. Consumers see it as well. So, I think it's going to be very tricky for policy makers, especially since they're going to be going in without any October data um on on on what's going to happen. And likely however they land there will be there will be descents. >> Uh I want to end on this one final question. How will AI fundamentally change consumer sentiment in the long run? Not immediately. It's going to take some time to adjust. Let's assume we all have some sort of personal assistant either uh through software or even hardware down the line. Uh do you think that will ease the load on some people? Do you think that will boost productivity overall? Do you think people will be generally happier or worse off? Have you thought about this issue? >> I think it depends entirely on what it does with labor markets. If um if unemployment stays where it is, if if a if the proliferation of AI um does not affect the overall level of employment, then I think it will certainly boost sentiment and um and a lot of consumers will feel better off. Um but I'm not sure how good consumers will feel about having a personal assistant helping them, an AI personal assistant helping them if they've lost their job. So, so I think it really hinges on whether firms react to this by um by firing their workers or or by writing an increased wave of productivity. >> Appreciate your time. Thank you very much. Where can we keep up to date with your work in the meantime? >> Um you can come to our website um ww.sca.isr.youish.edu. I hope you'll put that up for me. Um, which we update at 10:00 a.m. at every data release and there you'll find links to our special reports um and and data downloads for those of you who want to do some digging of your own. >> All right, thank you very much Joanne. We'll put the link down below and yes, do check out the uh um sentiment indicator. Keep up to date with that. It's very important indicator that's used by a lot of people. Thank you very much. We'll speak again soon. Take care for now. >> Thank you. >> Thank you for watching. Don't forget to like, subscribe.
Sentiment Hits 40-Year Low, Brace For Massive Job Losses? | Joanne Hsu
Summary
Transcript
71% of consumers expecting unemployment rates to go up in the next year. When we ask consumers about their potential for you or your spouse to experience job loss in the next 5 years, that is extremely elevated. For people who do not participate in stock markets, their sentiment has just continued to decline. For folks with smaller portfolios or no portfolios at all, they don't have the portfolios to help them enjoy the gains from from the stock market. Stock markets are are really putting a a lot of value on the potential for AI to drive the economy. That's not something that consumers are optimistic about or they're not thinking about it at this time. >> I'm pleased to welcome back the show Joanne Shu. She is the director of the service of consumers and research associate uh professor at the University of Michigan and uh she and her team are responsible for putting together the consumer sentiment index that economists and investors alike regularly follow uh that's published by the University of Michigan. Welcome back to the show Joanne. Good to see you. >> Thanks for having me. it has come to our attention that the consumer sentiment has hit uh near record lows and let me just show a uh chart here um that's on the homepage the uh consumer sentiment of Michigan index we have here uh the latest data point much lower than where it was couple we I we had you on the show 3 to four months ago and back then it was around here so it had shown slight improvements since the bottoming of um of of sentiment in April 2025 But it's now reached even below that level. And just looking at the broader chart here, if you zoom out, you can see that when the baseline was around 100 back in 2017 2019, um we're about half of that right now. So can you just comment on the most recent decline and more broadly why consumers today in 2025 feel so much worse about the economy than even six, seven years ago? Uh first of all, let's kind of recap where where uh where we were the last time um I was on. So essentially sentiment had bottomed out in April and May of this year uh concurrent with the uh announcement of the so-called reciprocal tariff regime. Um and consumers at that time were pretty shocked by just how high the tariffs came in and they were broadly uh bracing for a worst case scenario. Um in the months um over the summer started to feel a little bit better about the economy. That's the uptick that you see um over the summer um because uh you know tariff rhetoric started to calm down a little bit. There were fewer announcements of of tariff hikes and um and so consumers started to uh breathe a little bit of a sigh of relief. But the thing is since then consumers are just not confident that um inflation is going to uh isn't going to come back. um even though they're not really bracing for a worst case scenario anymore, they're looking around them um and they're feeling very precarious about inflation coming back and also importantly very precarious about labor markets. So they their number one factor on their minds right now is affordability, cost of living and they're feeling pressure on both sides of that both the income side as well as the expenditure side. Also during uh the government shutdown, which uh by the way ended last uh last week, um SNAP was put on pause and um it's a supplemental nutritional um assistance program and we we we have a number of Americans taken off the program, but I think it's going to come back. Correct me if I'm wrong. And I I think I I was just reading this morning a lot of people have to reapply and I wonder how much of that contributed to the worsening sentiment. >> So in October we didn't and and which was when the uh the the shutdown started in the beginning of the month. We didn't really see a whole lot of spontaneous mentions about the government shutdown in October. Consumers really weren't connecting the shutdown to the economy. They were really primarily concerned about uh prices and and incomes. November, as of November 7th, our most recent data release, um prior to the end of the shutdown, uh the story was very different. Uh the share of consumers spontaneously mentioning the shutdown quadrupled between October and November. Um about 10% ultimately, which is about what we saw in 2019 after a month of that particular shutdown. And so it was definitely something that was on people's minds. Um as you can see, October sentiment was already pretty low, so it didn't really push things much further lower in November. it was already low to begin with. So, it definitely contributed to the no to the continued downtick in um in sentiment, but it's not the primary reason sentiment is low right now. Um so, I mentioned 10% of people um spontaneously referencing government shutdown in the first half of November. Uh contrast that to u almost 60% of consumers continually continue still talking about um about tariffs. Uh so that's just down just a little bit from the peak of 65 66% that we saw earlier in the summer. Um but consumers continue to be quite worried about tariffs particularly and how it's going to pass through to prices and a potential weakening in business conditions. >> Are you concerned about um weak spending into the Christmas holidays? >> What is very clear in our data is that consumers don't feel confident right now. They don't feel like they're thriving. And when we ask about major purchases like um like cars or durable goods, consumers are telling us it's a terrible time to buy those things. Um so they don't not only do they feel like prices are too high right now, um they don't feel like it's a good time in the economy, a good time for their personal finances to lock in several years of of installment payments. Um that being said, uh holiday shopping is typically not quite so big ticket. Um, so consumers may, even though they're unwilling to make these major purchases like a new house or a new car, uh, they may be willing to um to spend some money on on lower uh on lower cost items. Um, particularly those who have not actually yet experienced a reduction of their incomes. Um but we have um as of preliminary in November data we had a pretty strong surge in the share of consumers telling us that weakening incomes were uh were dragging down their personal finances. Uh last month it was only 20% of consumers. This month it was about 29. So that is a very sharp increase. It's still not a majority of consumers who are telling us their their incomes are weakening. But that is um you know that's a sizable group that can't really can't really be ignored. Um, yeah. >> Which group is that, Joanne? Uh, because I'm looking at the Atlanta wage tracker, and even though it wage growth is stagnating, it's not declining significantly this year. >> Well, weaker weaker incomes can come, it can happen in a few different ways. It could be um that someone lost their job or their job they couldn't find a new one or their unemployment insurance benefits ran out because they've been unemployed for a very long time and can't find a new job. So, it's not necessarily that you are your household that that you got a pay cut at your specific job because these are being measured at the household level, you and and your spouse. Um and um and part of this could could be also related um to this idea of the SNAP benefits that you mentioned before. If consumers are anticipating that benefits that used to be there for them are no longer going to be there for them, um it could uh this could be part of this idea of weakening incomes generally. >> Before continuing with the video, let's talk about today's sponsor, Manador Technologies. That's ticker MATA.V on the TSX Venture Exchange and the OTC market MATF. Matador is a Bitcoin ecosystem company that uses Bitcoin as its primary treasury asset while building products around the Bitcoin network. They recently closed the first 10.5 million US trench of a secured convertible node facility that can go up to a hundred million in total. This capital is dedicated solely to purchasing Bitcoin for their balance sheet. The nodes mature in December 2027 with interest of about 8% which drops to roughly 5% if they uplist to a US exchange. Their target is to eventually reach around 1,000 bitcoin by the end of 2026 and expand to approximately 6,000 bitcoins by 2027, aiming to eventually hold close to 1% of the total bitcoin supply. You can check out the link in the description down below or scan the QR code here to learn more about Matador and its Bitcoin first approach. Remember that's Matador Technologies trading on the TSXV under MATA.V and on the OTC MATF. Going back to earlier statement about how people are putting off big ticket purchases. If the underlying well I guess if if they're putting off purchases now is the underlying assumption that these things cars, refrigerators, big appliances they will decrease in value or at least inflation will stall sometime in the future. Um otherwise if people expect prices to get even higher maybe they'll be buying now. Right. So um can you evaluate that assumption and do you agree with that? >> Sure. But what you're talking about is this idea that inflation expectations can become a self-fulfilling prophecy. And when people feel confident about their incomes, um that is more likely to be true. If they feel like they have the incomes to cover, you know, 3 years worth of car payments, two years worth of a worth of a loan or or whatever that big ticket item item is, then yes, they they might um subscribe to inflationary psychology and try to avoid that price increase by buying. Now what's different about the current moment is that people just don't feel confident about their incomes. So for them take making a big ticket item a big ticket purchase even if it might allow them to avoid high higher prices in the future uh doesn't really feel prudent to them and that's what they're telling us. Um now I will say that inflation expectations have come down quite a bit over the last few months. Still much higher than we were the even at the beginning of the year and and and a year ago as well. Um, so consumers again are not no longer bracing for the worst case scenario with inflation that they were expecting back in April and May, but they they still do broadly expect inflation to coming to to come back. Um, but even so, I think they just don't have the uh confidence in their incomes. And it's not just the share of people telling us that weaker incomes are driving down their personal finances. when we look at labor market expectations, um we have 71% of consumers expecting unemployment rates to go up in the next year. So that's prospective. These are expectations, not not talking about right now. And maybe that's not a problem if um if you think you know unemployment is going to affect other people, it's not going to affect me. But when when we ask consumers about their potential for job loss for you and your you or your spouse to experience job loss in the next 5 years, that is extremely elevated. Uh and when we ask specifically about either nominal incomes or real income growth, a growth in both of those dimensions, that's extremely weak right now. Um nominal income growth has been fairly steady but steady at very very low anemic levels. Um so broadly speaking, you know, we have 29% of consumers telling us that their incomes are already pretty weak now um and are dragging down their personal finances now. And then we have a lot more consumers telling us they're expecting things to get worse going forward. Okay, I'm going to show you a chart here. This is the um consumer sentiment index once more uh just graphed here on Trading View um like we discussed nearrecord lows. Now, uh the line is in red. I'm going to overlay this with the S&P 500 uh which will be the blue line. Now, it's not a perfect relationship, of course, but if you zoom back, you can see that throughout periods of history, they've been kind of moving roughly in the same direction. Whenever consumer sentiment um is weaker uh the stock market tends to have fallen um kind of like acting as a coincident indicator almost and this has been persistent. See I'm looking at 2014 to 2020 uh 2020 uh was a was co so that that was a big drop there in both the stock market and sentiment. What happened now? See the blue line continues to move up higher and then there's this big divergence here and it it's more apparent in the last couple of months. So either the stock market is completely out of whack or consumer sentiment is going to snap back. Why is this happening? >> Well, it's very clear that stock market participants generally and consumers have completely different interpretations of what the impact of tariffs are going to be um on on the economy or or put it another way, the relative impact of tariffs versus AI. AI is not something that consumers are are bringing up on their own as a possible support for the economy in the future. They're not really focused on that. they're really more focused on pocketbook issues. Um, when you drill down with consumer sentiment on different parts of the economy, um, you know, in November, uh, sentiment declined for pretty much every demographic group. The one exception were were consumers with the largest third of stock holdings. So, consumers with the largest stock portfolios, their sentiment actually increased 11% in the beginning of November. Um so these stock market gains um so so first of all higher income higher wealth people are enjoying the stock market gains that is supporting their their sentiment um a bit uh they're really the only ones who sent whose sentiment has really increased since that bottoming out in April and May for people who do not participate in stock markets their sentiment has just continued to decline um and for folks with smaller portfolios or no portfolios at all they're they're focused on stock uh on pocketbook issues income um inflation and but they don't have the portfolios to help them enjoy the gains from from the stock market. Um so I guess that's the causal chain and going in one direction and the other is again stock markets are are really putting about a lot of value as I understand it um on the potential for AI to drive the economy. That's not something that consumers are optimistic about or they're not thinking about it at this time. If I pull up a chart of a even longer um time frame, this goes back all the way to the beginning I believe of the data collection 1960s and you can see how right now was currently at or near the level of 1981. There was a recessionary gray bar there and we had very very high inflation. In fact, Vulkar was just in the middle of raising interest rates to double digits to combat very high inflation. It seems like consumers are very much concerned about inflation and of course a recession in the late '8s was both or early 80s rather was both. Right now we have nowhere near levels of 18 1981 um inflation and it doesn't look like Ember has designated this a recession. So it seems a little bit different. Uh one way to look at is consumers are overreacting. But I'll let you react. >> Consumers again are just really focused on pocketbook is issues right now. So it's not just inflation but also high prices. What we saw in the period uh you 2022 to 24 period uh consumers were fully aware that inflation was slowing. Um we could see that very clearly in the downward trend in their inflation expectations but at the same time they were continued to be very very frustrated by the persistence of high prices and that's still that's where we're at right now. Um we have I think it's about 48% of consumers so almost half of consumers um mentioning that high prices were dragging down their personal finances. So that's that's a lot. I mean, they're they're perfectly aware inflation isn't where it it was a few years ago. Um, and of course, we know that inflation now or inflation even in this post-pandemic period is still lower than it was in the 70s and 80s. Um, but consumers are are just really frustrated by what's going on. Um, at the same time, I think it's really important to note um the very different contextual societal context now versus, you know, 40 40 plus years ago. Um so when we look at the share of consumers you know telling us news about inflation um you know we ask people what news have you heard about business conditions about the economy and then we ask you know positive or negative and then we asked them what have you heard the share of people saying they heard negative news about inflation in the post-pandemic period was so much higher than it was in um in the 70s and 80s. Uh the information news environment is vastly different. You know, back then people were getting their news from the same places, the same evening news, the same radio, um the same newspapers, um and now we just have u a news cycle that's 24 hours. Um people are all consulting different different types of information, not to even mention social media and um and social media algorithms serving you up a lot of information. So the tenor of news about inflation is totally different now than it was before. Um, so it's I think it shouldn't be that much of a surprise that consumers are reacting to these realities in different ways. >> Is this a K-shaped economy right now? Do you have data on whether or not the um people of the higher income tiles are reacting differently or have different sentiment? >> We are absolutely seeing that higher income, higher wealth consumers have more favorable levels of sentiment than um than folks at the bottom of the income distribution. And this is especially clear in the last uh 6 months or so. Is this divergence normal, Joanne? >> It is typical that there is an income or wealth gradient and that gradient closed that gap closed completely in April and May of this year with the tariff situation and I'll note again it closed in the middle of 2022 also when um inflation hit its peak. So during those two periods uh June 2022 and June 2025 so almost exactly three years apart all um high and low income high and low wealth those groups converge in sentiment um um and in the period following 2022 um all the gains and sentiment were really concentrated at the top of the income and wealth distribution. So you could see a case K shape then as well. Um, and I think that's very consistent with the fact that consumer spending remained so strong in the post-pandemic inflationary period even though sentiment was really low. The people who generate the lion share of aggregate spending, they their sentiment was fine. Um, the wealth gap and sentiment actually grew during this grew by 2024. Now again that gap collapsed when the tariffs were implemented and I think consistent with this uh this general state of of uncertainty around what these how these tariffs were going to land if they were going to stick and what it was going to how it was going to pass through to the economy. Um everyone across the wealth spectrum um braced for a worst case scenario in in April and May. Since then, sentiment is slowly recovering um on an upward trend for folks with uh high incomes and large stock portfolios and it's just continuing to um to >> This is an interesting piece of news I want to get your reaction to. So, it seems like it's not just people in the lower income um bracket that's spending less. Apparently, according to the CBC article, uh the wealthier are also spending. from McDonald's Savers Value Village companies are reporting that highincome shoppers are turning into deal hunters. I'm not sure how they gather data that their customer at the cashier line is a high income earner. But anyway, um let let's let's just keep going here. Um for roughly 2 years, executives have warned investors that low-income consumers were spending less dining out less frequently and growing picky about their shopping. Now, there are more signs that highincome shoppers are watching their budgets, too. The theory here is that high-income shoppers typically lead consumption and so if they're spending less, maybe that's a sign of a broader slowdown. Are you seeing any evidence of this? Are you asking people um high-income earners through surveys, for example, how they're spending their money? >> Uh we are not specifically asking questions about um broad questions about spending. We're asking about spending intentions for these big ticket items. And for the big ticket items, no one thinks it's a good time to buy. uh people think across the income distribution believe that prices are too high and borrowing costs are too expensive. Um and while I have mentioned that sentiment has lifted for these high-income high wealth consumers in the last few months, they're still not in favorable territory. They're still in, you know, generally dower views of the economy. Um so they are definitely more confident about their incomes and their wealth than um than people at the lower end of of the spectrum. So they have stronger expectations. Um but they still don't feel great about the future of the economy. Um so it wouldn't surprise me at all if they are trading down what they're spending. Um I mean I don't know that they're necessarily I would expect them to massively cut back on their total spend. Um but it would um be consistent with our data if they were choosing uh to to look for more bargains um or substituting away um away from more expensive goods. >> So let's close off on what's ahead here. So, $2,000 dividends are what uh the Trump administration is proposing. Treasury Secretary Scott Basent told uh reporters that uh it'll most likely be given out to families making less than let's say $100,000 a year in income. Um given that the government shutdown is now over and given that this proposal is now gaining steam, although it hasn't actually been enacted yet, what do you expect consumer sentiment to do in the next coming months? >> Consumers perceive a lot of uncertainty in the economy right now. So, I I think at this point um they may be less likely to react quickly to a policy announcement. Um and they might wait until the policy actually hits. Um they reacted so quickly to the uh the April uh Rose Garden tariff announcements um which you know they um recalibrated it took a couple of months to recalibrate their expectations in light of how things actually unfolded. um that you know I think consumers are going to really wait and see whether not not whether or not that money actually hits their pockets and if it does I do think it will provide some support to um to to consumer sentiment um because you know that that is something that is that directly addresses their their pocketbook um their pocketbook concerns that they've been very loud and clear about. Well, is it true, Joanne, that even with a one-time stimulus, consumer um spending habits wouldn't fundamentally change because people know it's one time? I mean, I would only go out and eat more, eat at restaurants more frequently, or buy things more often if I know my income overall is going to be sustainably higher, not just because I'm receiving a one-time $2,000 check. >> That's that that's right. So, what I'm saying about a boost to sentiment is really about their feelings about the economy and not necessarily their spending. Um there's been quite a bit of academic research about what people do with a one-time windfall. Um and and you know, they'll they'll spend some of it, but they'll save some of it and they they'll use some of it to pay down debt. If this is really going to um to lower income consumers, um we know that lower that that consumers with lower incomes um they have, you know, debt burdens and we know that, you know, debt delinquencies are um are a sign of vulnerability. So, a lot of these lower-income people have a a decent amount of debt load, and it wouldn't surprise me if much of that money went there rather than to actual spending. >> Finally, let's touch on the labor market and the Federal Reserve. So, we have here reports that the unemployment rate likely increased 4.4% in September. The labor market is showing signs of significantly weakening. We've discussed that briefly already. Uh, what do you think the Federal Reserve is going to do in response? There's now uncertainty as to how many rate cuts they will actually enact going forward given that inflation is also rising. Uh and we have a few denters in the Fed already and we have uh uh Fed President uh vice Fed vice chair Jefferson stating that downside risk to employment um has increased compared to upside risks to inflation which is a very important statement because they have to balance both. What do you think is their next step? >> What what I would do to be a fly on the wall for the next FOMC meeting um I don't envy envy these policy makers. They have a tough path ahead of them. You know, I think the key thing is is one thing that Cher Powell's been mentioning a lot. There's no risk-free path. Um there are risks on both sides of of the the dual mandate. Um and looking at the the consumer sentiment survey, you can see evidence for both of those risks very clearly. Consumers see it as well. So, I think it's going to be very tricky for policy makers, especially since they're going to be going in without any October data um on on on what's going to happen. And likely however they land there will be there will be descents. >> Uh I want to end on this one final question. How will AI fundamentally change consumer sentiment in the long run? Not immediately. It's going to take some time to adjust. Let's assume we all have some sort of personal assistant either uh through software or even hardware down the line. Uh do you think that will ease the load on some people? Do you think that will boost productivity overall? Do you think people will be generally happier or worse off? Have you thought about this issue? >> I think it depends entirely on what it does with labor markets. If um if unemployment stays where it is, if if a if the proliferation of AI um does not affect the overall level of employment, then I think it will certainly boost sentiment and um and a lot of consumers will feel better off. Um but I'm not sure how good consumers will feel about having a personal assistant helping them, an AI personal assistant helping them if they've lost their job. So, so I think it really hinges on whether firms react to this by um by firing their workers or or by writing an increased wave of productivity. >> Appreciate your time. Thank you very much. Where can we keep up to date with your work in the meantime? >> Um you can come to our website um ww.sca.isr.youish.edu. I hope you'll put that up for me. Um, which we update at 10:00 a.m. at every data release and there you'll find links to our special reports um and and data downloads for those of you who want to do some digging of your own. >> All right, thank you very much Joanne. We'll put the link down below and yes, do check out the uh um sentiment indicator. Keep up to date with that. It's very important indicator that's used by a lot of people. Thank you very much. We'll speak again soon. Take care for now. >> Thank you. >> Thank you for watching. Don't forget to like, subscribe.