By Dejan Ilijevski, MBA, MS — SCM Investment Services
Both of those things are true right now — and the gap between them is the most useful thing in the headlines this month.
In May 2026, the University of Michigan’s Consumer Sentiment Index fell to 44.8. That is reportedly the lowest reading in the survey’s history, which goes back to 1952 — lower than the depths of the 2008 financial crisis, lower than the 2022 inflation scare, lower than any month in more than seven decades of asking Americans how they feel about the economy. People are worried about prices, about gasoline, about jobs.
At the same time, the S&P 500 has been setting record highs.
If those two facts feel like they shouldn’t coexist, you are not alone. The intuition is reasonable: if people feel terrible about the economy, shouldn’t the market reflect that? The data say otherwise — and understanding why is one of the more practical things a long-term investor can do this year.
How feelings and markets came apart
Sentiment and stock prices measure two different things.
The Michigan survey measures how households feel about their own finances and the economy in front of them — the grocery bill, the gas pump, the job market, the cost of a mortgage. The stock market, by contrast, prices the expected future earnings of large, often global companies. Those two pictures can drift far apart, and right now they have.
A few forces are pulling them in opposite directions. Much of the market’s recent strength has reportedly been concentrated in a handful of large technology firms benefiting from spending on artificial intelligence — gains that do not necessarily show up in a typical family’s monthly budget. Meanwhile, elevated prices and higher interest rates continue to squeeze households even as corporate earnings hold up. Commentators have described this as a “K-shaped” economy, where the experience of large companies and the experience of ordinary consumers split apart.
The point for investors is not which storyline is “right.” It is that the mood of the economy and the path of the market are not the same signal.
Why gloom is a poor investment guide
Here is the uncomfortable part for our instincts: the moments when people feel worst about the economy have not historically been the worst moments to be invested.
The chart that accompanies this piece marks the two most recent sentiment troughs before today — the 2008 financial crisis and the 2022 selloff. Both were painful. Both were followed by recoveries. That is not a promise that markets always rebound, and it is certainly not a forecast about what comes next. It is a more modest, well-documented observation: selling because the mood is dark has tended to be a costly instinct, because markets rarely wait for the headlines to feel safe before they turn.
This is the same behavioral pattern I have written about before — in The Most Expensive Button on Your Brokerage Account. In that piece the trigger was a scary market. Here the trigger is a scary feeling about the economy. The mechanism is identical: emotion, translated into a portfolio decision, at exactly the wrong time.
The pressure is real — that is a different question
None of this means the record-low sentiment number should be dismissed. For many households, the squeeze is genuine. A 44.8 deserves respect, not a lecture about staying invested.
The useful move is to separate two questions that often get tangled together:
- Is my household budget under real pressure right now? If so, that is a legitimate, present concern — and a good plan addresses it directly, through an adequate emergency reserve, a sober look at spending, and a strategy for any high-cost debt.
- Should I change my long-term investment plan because the economic news feels bad? Usually, no. The portfolio is built for years and decades, not for this month’s mood.
Conflating the two is where the cost creeps in: a real budget worry gets “solved” by selling investments that were never the problem.
What a plan is actually for
The job of an advisor in 2026 is not to predict whether sentiment rebounds, whether the AI trade cools, or what oil does next quarter. It is to build a plan whose discipline does not depend on knowing those answers.
In practice, that means a portfolio matched to your goals, time horizon, and capacity for risk; a cash reserve sized to your actual near-term needs rather than to the headlines; a rebalancing policy decided in advance; and a conversation before any large change. An advisor can help support that discipline, but cannot eliminate market risk, prevent losses, or assure better performance.
Sentiment will recover, or it won’t, on its own schedule. Either way, how you feel about the economy was never meant to be the thing steering your portfolio.
Methodology Note on the Chart
The accompanying chart plots two series from 2001 through May 2026. The left axis shows the University of Michigan Index of Consumer Sentiment; the right axis shows the S&P 500 on a total-return basis (dividends reinvested), indexed to 100 at the start of the window. Consumer sentiment data are collected by the University of Michigan Surveys of Consumers, with the index dating to 1952 (monthly since 1978). The “lowest since 1952” description refers to the full survey history, not only the years shown.
The S&P 500 is an unmanaged index of 500 large-capitalization U.S. stocks and is widely regarded as representative of the U.S. equity market. The University of Michigan Index of Consumer Sentiment is an unmanaged survey-based measure of consumer attitudes. Indexes do not reflect the fees, expenses, or taxes associated with investing, and investors cannot invest directly in an index.
A note on the chart’s central point: record-high equity values during a period of weak consumer sentiment should not be read as evidence that the stock market is a safe haven or a guaranteed store of value. Investing involves risk, including the possible loss of principal, and markets can decline substantially and without warning.
Sources: University of Michigan Surveys of Consumers; S&P Dow Jones Indices (S&P 500 Total Return Index); contemporaneous market and economic reports.
Investment advisory services offered through SCM Investment Services, a Registered Investment Adviser. This material is for informational and educational purposes only and is not intended as investment, legal, or tax advice. All investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Any examples are for illustrative purposes only and do not represent any actual investment. Different assumptions or dates would produce different results. Please consult a qualified professional before making investment decisions. For SCM Investment Services’ full firm disclosures, please see our disclaimer page. Form ADV Part 2A is available upon request and at scminvesting.com.
