To The Moon

Consumer Confidence Sinks to Near-Record Low

U.S. consumer sentiment plunged to 50.8 in early May, according to the University of Michigan, marking the second-lowest reading since 1978. The only lower point came in June 2022, when inflation hit a 9.1% annual pace.

Consumer

• Tariff anxiety is the primary driver: nearly 75% of survey respondents cited tariffs unprompted.

• Rising concern about future earnings, inflation resurgence, and job market softness added to the gloom.

• Inflation expectations also edged higher, a sign that consumers fear price pressures could persist.

“If taken at face value, Americans would be crashing the economy by spending next to nothing,” said Robert Frick, economist at Navy Federal. “But that’s not what’s happening.”

Consumer Behavior Tells a Different Story

Despite the negative outlook, spending remains resilient:

• Retail sales rose 0.1% in April, modest, but still a gain.

• Q1 consumer spending increased 1.8% YoY, according to early GDP data.

The disconnect between how consumers feel and how they act has become a recurring theme since the pandemic. Emotional pessimism isn't yet translating into economic retreat.

Moody’s Downgrades U.S. Credit Rating

Aa1 US Rating

Late Friday, Moody’s cut the U.S. sovereign debt rating from Aaa to Aa1, joining Fitch and S&P in removing America’s top-tier credit status. The move reflects:

• A federal debt load approaching $37 trillion

• Budget deficits near $2 trillion/year

• Little political appetite for structural fiscal reform

“These no longer fully counterbalance the decline in fiscal metrics”, Moody’s warned, citing rising entitlement costs and stagnant revenue.

This downgrade could raise borrowing costs over time and challenge America’s “safe haven” status.

Wall Street Rallies Despite Warnings

Markets shook off consumer pessimism and the credit downgrade, instead focusing on:

• Tariff rollbacks by the Trump administration (cutting China duties from 145% to 30%).

• Hopes for new bilateral trade agreements.

• Strong corporate earnings momentum.

Major index performance:

• Dow Jones: +332 points on Friday, +3.4% weekly, now positive YTD

• $S&P 500(.SPX)$ : +0.7% Friday, +5.3% weekly

• $NASDAQ(.IXIC)$ : +0.5% Friday, +7.2% weekly $Tesla Motors(TSLA)$ $Palantir Technologies Inc.(PLTR)$ $NVIDIA(NVDA)$

Stocks

Investors are betting that policy relief and global deal - making will support equities, even as structural risks mount.

What’s Ahead: Earnings & Economic Data

Next week offers a reality check on the consumer and housing markets:

• Retail Earnings: $Home Depot(HD)$

  (Tues);

  Lowe’s, Target $target (Wed);

  Deckers; Williams-Sonoma (Thurs)

• Macro Data: S&P Global Manufacturing & Services PMIs (Thurs) ; Existing Home Sales (

  Frid); New Home Sales (Census Bureau)

Retailers like Walmart already warned that tariff-related price hikes are coming. Upcoming reports will clarify how much pressure U.S. consumers can bear.

Conclusion: A Market at Crossroads

The U.S. economy is sending mixed signals. Consumer sentiment has rarely been worse, but consumer spending and equity markets remain solid. For now, investors are leaning into optimism, fueled by policy easing and corporate strength.

But with debt downgrades, tariff volatility, and fiscal strain in the background, the market's current confidence may soon be tested.

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This summary is for informational purposes only and does not constitute financial advice. Investors should conduct their own research before making investment decisions.