Consumer Sentiment Nears All-Time Low

Yields close flat despite weak consumer sentiment. Treasury yields declined ~3 bps on weak University of Michigan consumer sentiment, which dropped near the lowest levels on record (50.3 from 53.6 last month). The decline reversed later in the afternoon, and yields closed nearly unchanged with the 2-year yield at 3.56% (a 1bp decline on the week) and the 10-year yield at 4.10% (a 2 bp increase on the week). Meanwhile, the S&P 500 and NASDAQ sold-off this morning but closed 0.13% higher and 0.21% lower, respectively, on optimism that the government shutdown will end soon.

Michigan consumer sentiment posts near record low. University of Michigan consumer sentiment dropped to near record lows in November, according to preliminary data. Headline sentiment fell to 50.3, down from last month’s 53.6 and below expectations of 53.0. Confidence in current conditions hit a record low, dropping 6.3 points to 52.3 and well below expectations of 59.0. Today’s data showed consumer sentiment falling across age, income, and political demographics in the US, with confidence among democrats and independents hitting its lowest level since 1984. The only bright spot was long-term inflation expectations, as the 5-10-year inflation outlook fell to 3.6%, down from 3.9% in October, although short-term inflation expectations edged up from last month’s 4.6%, to 4.7%. On the whole, the broad decline in US consumer sentiment has been largely fueled by uncertainty due to the ongoing government shutdown.

Vice Chair Jefferson says Fed should move cautiously. Fed Vice Chair Philip Jefferson today shared his support for the Fed’s October rate cut, citing cooling in the labor market, although he expressed the need for the Fed to make future policy decisions hesitantly. He now views the current policy rate as “somewhat restrictive,” and acknowledges that inflation remains persistently elevated, driven by US tariff policy. Jefferson sees signs that inflation will gradually move closer to the Fed’s 2% target and views the labor market’s stability as uncertain due to AI. As a result, Jefferson explained that “it makes sense to proceed slowly as we approach the neutral rate” and did not share whether he would support another rate cut at the upcoming FOMC meeting in December.