It’s already quite low:
Figure 1: U.Michigan Consumer Sentiment (blue), Conference Board Confidence Index (brown), Gallup Confidence Rate (green), all demeaned and divided by standard deviation 2021M01-2025m02. Note “Gallup” differs from spread used in previous graphs. Red dashed line at “Liberation Day”. Source: UMichigan, Gallup, Conference Boardand author’s calculations.
Currently, both U.Mich and Conference Board measures are about 1.75 standard deviations below January levels.
What do previous episodes of conflict show?
Figure 2: U. Michigan Consumer Sentiment (blue). NBER defined peak-to-trough recession dates shaded gray. Source: U.Michigan via FRED, and NBER.
In Gulf War I, there’s a period of depressed sentiment, until Desert Storm is executed. There’s only one month of depressed sentiment at the beginning of what was termed Operation Iraqi Freedom. Will these patterns repeat? One caveat: sentiment has never been this low at the onset of a war.
