Consumers Feel Bad, Commodities Feel Great

For the week ended 7/11/26.

The University of Michigan found itself defending its closely watched consumer sentiment index last week against critics who argue recent methodology changes are making Americans appear more miserable than they really are. The survey shifted from cellphone interviews to primarily web-based responses in 2024, prompting claims that the new format is skewing results downward. Survey director Joanne Hsu pushed back, arguing that the weakness reflects a genuine post-pandemic shift in how consumers view the economy.

Perhaps both things can be true: the survey changed, and Americans remain deeply unimpressed. June consumer sentiment edged up to 91.2 from 90.6, but confidence remains well below levels normally associated with a healthy economy. Apparently, 2.1% first-quarter GDP growth, 4.2% unemployment and record stock prices are no match for grocery bills, insurance premiums and a 6.5% mortgage rate.

Speaking of housing, there may finally be a pulse. Mortgage-rate lock volume rose 10% in June and 14% from a year earlier, reaching its highest level in more than three years. Rates remain painfully high by recent standards, but they are comfortably below the nearly 8% peak reached in 2023. Buyers may not be thrilled, but some are evidently accepting that the mythical return of 3% mortgages is not coming anytime soon.

Meanwhile, Wall Street has a new request for the technology giants funding the artificial-intelligence boom with debt: for pity’s sake, slow down. Six major hyperscalers have issued roughly $244 billion in bonds globally this year, compared with $108 billion during all of last year. The investment-grade market recently struggled to digest $75 billion of issuance from Nvidia, SpaceX and Amazon. Investors are not necessarily worried about these companies paying their bills; they are worried that hundreds of billions more in bonds are lining up behind them. Even a strong stomach has limits.

Commodities led last week’s market performance with a 3.2% gain, fueled once again by renewed fighting in the Iran war and higher oil prices. The asset class is now up 17.9% year-to-date and 27.8% over the past year. U.S. stocks gained 1.3%, while bonds – because apparently disappointment is now their core competency – lost another 0.4%.

The broad U.S. bond market has returned exactly 0.0% this year. After accounting for inflation, investors have lost roughly 2.4% in purchasing power. Meanwhile, many private-credit strategies continue yielding around 9%–10%. Private credit carries different risks and certainly is not suitable for everyone, but the reflexive panic surrounding the asset class increasingly looks less like careful analysis and more like crowd behavior wearing a necktie.

Tuesday brings June CPI. Expectations had begun easing after the brief U.S.–Iran ceasefire. Then everyone started shooting again. So much for the forecast.

Good morning, and have a great week.

Interesting data point of the week.

Source: Visual Capitalist

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