Consumer sentiment is slipping again even as inflation continues to recede. According to a new analysis from Plante Moran, U.S. households remain significantly more pessimistic than the underlying inflation trend would suggest. Despite meaningful cooling in year-over-year price data, consumers report worsening expectations about the economy, slower anticipated spending, and a general sense that financial pressures remain elevated.

This gap between economic data and household confidence isn’t just psychological. It reshapes how markets interpret demand, pricing power, and the trajectory of monetary policy heading into 2026.

When inflation cools but confidence falls, it creates a contradiction at the center of the macro outlook — and contradictions always matter for positioning.

Plante Moran highlights a clear divergence:
– headline inflation has eased
– core goods inflation continues to soften
– wage growth has stabilized
– but consumer confidence remains weak

Households are responding less to the direction of prices and more to the cumulative cost of sustained inflation over multiple years. Many consumers feel that “cooling inflation” still means “higher prices than last year,” and that distinction shifts how they interpret their financial reality.

In practice, cooling inflation doesn’t feel like relief — it feels like a slowdown in pain. And that is why confidence is falling even though the official data looks better.

This weakness in sentiment can translate directly into slower discretionary spending, tighter household budgets, and more pressure on sectors tied to consumer demand.

A clash between consumer confidence and inflation expectations can pull markets in opposing directions:
• Bond markets may interpret weak confidence as a sign of softer demand and rising recession risk, supporting lower yields.
• Equities may face pressure in consumer-sensitive sectors if spending momentum weakens.
• Real assets may see a boost if investors anticipate slower growth and turn to hedges or income-producing hard assets.

In other words, falling confidence with cooling inflation blurs the path forward. It makes recession risks appear higher at the very moment inflation arguments for rate cuts grow stronger.

Markets don’t like blurred signals — they reprice around them.

A weak consumer theoretically gives the Federal Reserve more reason to consider easing. But falling sentiment without collapsing inflation doesn’t automatically unlock dovish policy.

If the consumer slows rapidly, it could:
– reduce pricing power for businesses
– pull down earnings growth
– pressure risk assets
– increase fears of a late-cycle slowdown

If the consumer slows but inflation remains sticky in select service categories, policymakers may hesitate to cut too quickly.

This is why the sentiment-inflation disconnect is not a trivial nuance — it reshapes the Fed’s two-sided risk: falling demand vs. sticky prices.

If you’re positioning around this clash, focus on how it affects three major asset classes:

Bonds
Weakening sentiment supports duration. If demand softens, yields may drift lower as markets anticipate slower growth.

Equities
Consumer-facing sectors may see pressure if sentiment pulls spending lower. Companies with strong pricing power or non-cyclical demand may outperform.

Real Assets
If growth expectations weaken faster than inflation expectations, real assets — including commodities, infrastructure, and income-oriented alternatives — may gain relative strength.

Above all, watch forward-looking sentiment data, not just inflation. Sentiment often moves ahead of spending, and spending often moves ahead of earnings.

Inflation alone doesn’t tell the story anymore. How consumers feel about inflation is becoming just as important as what the numbers say.

Plante Moran’s latest sentiment update captures a shift investors should not ignore: the U.S. consumer is growing more cautious even as inflation cools. That contradiction is often a precursor to slower demand, softer earnings, and more volatile market pricing.

Heading into 2026, the lesson is simple: pay attention to the gaps. When data and sentiment diverge, markets follow the pressure point — not the headline.

Not investment advice. Markets move fast. So should you.