Is UMich Trying To Tank Trump’s Stock Market?

Are Democrats trying to spark a recession by crashing the stock market with their insanely partisan and outlier-ish survey responses?

Since President Trump was elected, ‘hard’ data – that is actual economic values – has been steady (strengthening recently). On the other hand, over the last three months, ‘Soft’ data – driven by surveys of Americans (left, right, and center) – has plunged…

Source: Bloomberg

One of the major drivers of that collapse in ‘soft’ data has been the University of Michigan sentiment survey, which has seen an unprecedented partisan divide of delusion send sentiment down (Democrats have NEVER been more fearful of the future) and inflation fears up (32 year highs thanks to Democrats)…

Source: Bloomberg

And while we have done our best, along with Goldman Sachs and Fed Chair Jay Powell, to urge investors to recognize the outlier (and partisan) nature of the UMich survey…

First, inflation expectations in the survey have become extremely partisan. 

Second, the share of respondents in the Michigan survey who are Democrats has always been consistently higher than the share of respondents who are Republicans

Third, switching from a phone-based to an online-based data collection process has led to more extreme answers on inflation expectations.

These three issues together have boosted short-term inflation expectations in the Michigan survey by about 1.3pp and long-term inflation expectations by 0.5pp since 2024Q4. In particular, the change in distribution across political parties and increased partisanship together generated an outsized 1.0pp boost to the 1-year inflation expectation in February.

…the reaction has been the same every time – stocks puked…

Every single University of Michigan survey since Trump became president has slammed the market as a result of outsized inflation expectations driven by Democrat responses. 

The S&P was down in kneejerk reaction after all six UMich reports this year (Prelim and Final).

Six out of six is not a bad track record – almost as if it was done on purpose to drag stocks down and trigger a recession (something that Trump likely would not want but wouldn’t mind the lower yields that would infer). If traders believe the Democrats’ inflation fears, why are they buying bonds?

Of course, with ‘Liberation Day’ imminent, will it be different this time?

Source: Bloomberg

Will we bounce here? Europe just folded – offering concessions – and for now, Canada is all talk.

For the traders amongst us, the next UMich print is on April 11 (prelim) and April 25 (final).

Vol markets are already looking forward to it.