The Economy Is Growing. Sentiment Is in the Basement. That Contradiction Is Worth Understanding.

Here is the puzzle: growth is sitting right at its historical midpoint, recession odds from this zone historically run around 7%, and yet consumer sentiment is at or near the very bottom of its historical range. The economy is performing; people feel terrible. Both things are true at the same time.

This gap between how the economy is doing and how people feel about it has real consequences. Consumer sentiment this weak has historically recovered over the following year, but that recovery takes time. And if sentiment stays depressed, spending decisions follow even when incomes are holding up.

Equities moved higher Monday. The S&P 500 climbed 51 points to 7,773, the Nasdaq added 1.05%, and the VIX slipped to 15.42, its calmest reading in recent weeks. Oil fell to $87.48 a barrel, down 2.18%. The 10-year Treasury yield ticked up to 5.28%, with the 10-year to 2-year spread at 47 basis points, and credit conditions have eased back toward neutral after sitting at elevated levels. Technology is the one offensive sector actually outperforming the broader market right now; the rest of the field is mixed at best.

On deck today: markets will see the FOMC minutes from the last Fed meeting, and traders are already pricing in some yield relief ahead of that release.

Inflation is still running hot by historical standards. Monetary policy is still restrictive. Whether growth can hold at its current pace with those two headwinds in place is the question the next few months will answer.

The deeper read on what the bond market is actually telling us lands Sunday in The Long View. It is free, and it goes well beyond the five-minute version you just read.

ON1010 Research is an independent publisher of economic education and is not a registered investment adviser, broker-dealer, or investment company. This content is for educational and informational purposes only and is not investment advice or a recommendation to buy, sell, or hold any security. Published under the publisher exemption recognized by Section 202(a)(11)(D) of the Investment Advisers Act of 1940 (Lowe v. SEC). Always consult a qualified financial professional before making any financial decision.