The Politics of Sentiment

By Adam Thurgood on May 26, 2026

Consumer sentiment has collapsed.  The University of Michigan’s survey of how consumers are feeling about their world now stands at an all-time low, well below the despair of the financial crisis.  For most people reading this article, today’s economic conditions are nowhere near as bad as they were during the financial crisis, so what gives?

The answer appears to lie in a mix of political polarization, geopolitical uncertainty, and persistent economic pressure.  Political polarization has increased materially over the past several decades. The rise in party-line voting in Congress illustrates the degree of political tribalism that increasingly defines American politics.

Political identity increasingly shapes consumer confidence.  The chart below shows the University of Michigan’s confidence readings for Democrats, Republicans, and Independents.  The shaded areas represent which party controlled the White House.  Consumer confidence now varies dramatically based on which party controls the White House, with independents usually splitting the difference.  Today, Republican sentiment is high, but nowhere near where it was in Trump’s first term, while Democratic and independent sentiment is deeply negative.

What stands out today is the weakness in independent voter sentiment, which historically tends to sit between the two parties.  Economic and geopolitical pressures appear to be key drivers.  On the geopolitical front, the war with Iran is deeply unpopular.  This excellent chart by Marko Papic of BCA Research shows the public support of various wars at their inception date.  The current war is the lowest on record and public support is likely much worse today as consumers feel the pinch of higher gas prices and interest rates.

Politics alone does not explain the decline in confidence. Economic pressures are reinforcing the deterioration in consumer psychology.  Gas prices have increased roughly 60% since the end of last year, bringing a lot of pain to the average consumer.  Gasoline represents roughly 3% of the CPI basket.  If sustained, higher gas prices alone would add more than 1.5% to headline inflation.  For an economy with a 2% target inflation rate, that’s a meaningful shock to consumers and would no doubt impact sentiment. 

Higher interest rates are also weighing on sentiment.  Buying conditions for homes and interest rates are inversely related.  The inflationary surge in 2022, followed by sticky inflation since, has crushed home buying conditions.

The most important driver of weak sentiment may be the growing perception that incomes are no longer keeping pace with inflation.  Real income expectations have plunged to the lowest level on record.  Of all the charts we’ve looked at today, this is the most troubling.  The US is a consumer-driven economy.  If real income growth turns negative, consumers will either have to cut back their spending or use savings to maintain current levels of consumption.  Neither is a good outcome, as one hits economic growth immediately and the other has a short runway to the same outcome.

While politics is no doubt a major contributor to the abysmal sentiment readings, there are other important factors at play putting pressure on consumers of all parties.  While most of the people reading this article don’t think twice about food or energy prices, the majority of Americans scrape by paycheck to paycheck.  The increase in gas prices, interest rates, and a variety of other prices is beginning to weigh on the social mood.  If these pressures persist, weaker confidence may eventually translate into slower consumption, softer economic growth, and increased market volatility. Sentiment alone does not drive the economy, but sustained deterioration in consumer psychology rarely occurs without broader economic consequences.