The Conference Board’s consumer confidence index surged from 85.7 to 98.0. Such was the largest one-month increase since 2009! Clearly, progress on trade deals and the delay in implementing tariffs spurred the increase. Moreover, the recovering stock market also boosted consumer confidence. However, bear in mind that the index is coming off its lowest level since May 2020.
The present situation index rose slightly, as shown below, but the expectations index jumped from 55.4 to 72.8. It appears consumers are starting to gain confidence about the future. The following line from the report points to the potential for more robust personal consumption.
Compared to April, purchasing plans for homes and cars and vacation intentions increased notably, with some significant gains after May 12. Plans to buy big-ticket items—including appliances and electronics—were also up. Likewise, consumers’ intentions to purchase more services in the months ahead, with almost all services categories rising.
Dining out remained number one among spending intentions, followed by streaming services, while plans to spend on movies, theater, live entertainment, and sporting events increased the most over last month.
Also notable in the report is that the average expected 12-month inflation rate decreased from 7.0% to 6.5%. Although still high, it suggests that initial expectations for tariff-induced inflation may be abating.
While one month doesn’t make a trend, a potential reversal in consumer inflation expectations may provide some comfort to Fed members worried about inflation.
What To Watch Today
Earnings
Economy
Market Trading Update
As noted yesterday, the market was reaching more overbought levels on both a momentum and relative strength basis. While this is not a significant correction warning in itself, it does tend to suggest that the upside could be somewhat limited until a pullback or consolidation occurs. However, one indicator we watch closely is “money flows.” As we discussed yesterday on X:
“On @cvpayne show, we were discussing the #BuyTheDip mentality of #retail #investors. The S&P 500’s average gain of 0.31%, following down days in 2025, marks the strongest “buy-the-dip” responses since 2020.”
Of course, what is interesting about that is that the backdrop between today and 2020 is vastly different.
We can visualize those money flows on a technical basis. As shown, the strength of positive money flows is at levels usually seen near short-term market peaks. With the MACD indicator and money flows elevated, the risk of a consolidation or pullback in June is more probable. We will pay close attention to the flows over the next few weeks. If they begin to decline sharply, the market will likely follow.
With earnings season wrapping up and the share buyback window getting ready to close by mid-June, pay attention to your portfolio’s risk profile. We are currently overweight cash and are looking for a more strategic opportunity to deploy that cash in the near future.
The Coming Disinflation Push In A Few Graphs
We have often discussed the outsized role that rent and implied rental prices, i.e., shelter prices, play in the Consumer Price Index (CPI) data. Given its importance, we share a few graphs to help you appreciate that CPI may be much lower in the coming months when lagging CPI shelter prices catch up to market prices and fundamentals. First, however, consider that excluding shelter prices, the CPI is running at 1.4%, exactly in line with its level in the few years preceding the pandemic. Furthermore, the shelter price index within CPI lags real-time shelter prices significantly.
- The first graph shows that the most recent Case-Shiller Home Price Index declined last month for the first time in two years.
- The CPI rent sub-index has been rising at an approximate 0.3% a month rate. But, according to Apartment List and other private sector rent indexes, apartment rent prices have been flat to declining for over a year. Moreover, the Cleveland Fed’s New Tenant Rent Index, a measure of current rent prices, has declined over the last three quarters.
- The third graph shows that rental vacancies have been rising steadily and are now at their highest level since 2018. More supply of apartments provides leverage for renters to secure better rental rates.
- The last graph highlights that the construction of 5-unit or larger housing units is and has been running hot. Therefore, a continued heavy supply of apartments should help keep apartment rental prices constrained in the future.
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