2 min readConsumer sentiment new lows despite positive signals
The mood among consumers has deteriorated further this month, according to the University of Michigan’s survey. The headline index dropped to 57.9—its lowest level since November 2022 and even lower than at the onset of the three most recent pre-COVID recessions. This marks a sharp fall from 64.7 in February, driven largely by a 10-point drop in the expectations index. Historically, the headline index has only been lower 6% of the time since the survey began in 1967.
We maintain the view that longer-term inflation will continue to trend downward, although a bump in the road is expected. This was acknowledged during the FOMC meeting on Wednesday, where the Fed cited the current inflation uptick as transitory and largely driven by recent trade tariffs and the retaliatory tariffs from U.S. trading partners.
Despite the noise, the Fed reiterated its forecast of two rate cuts this year, as reflected in the dot plot, although the chart showed a wide dispersion of views for future years—highlighting continued economic uncertainty within the Fed itself.
In our view, the Fed’s willingness to look past tariff-induced inflation is a dovish signal, which markets interpreted positively—as seen in Bitcoin’s price rally following the announcement. While skepticism is growing around the possibility of three rate cuts this year, the Fed remains highly responsive to incoming economic data. A weak payroll report, for instance, could quickly prompt a shift toward further easing. In another dovish signal, the Fed announced a reduction in its quantitative tightening program, scaling back from US$25 billion to just US$5 billion per month. This further supports the view that the central bank is preparing to ease conditions if economic data continues to soften.
We’re closely watching employment indicators for March, including Homebase data, which suggests payroll growth could be as low as 50,000.
Crypto Market Sentiment Stabilizing
Crypto prices are showing signs of stabilization. Bitcoin (BTC) is up 7% week-over-week, after briefly dipping to its 200-day moving average of US$77K last Tuesday. Meanwhile, the Crypto Fear and Greed Index sits at 31/100, recovering from extreme fear at 15 just last Monday. Investor sentiment appears to be improving.
Over the past five weeks, US$6 billion has flowed out of crypto funds, including a record 17-day streak of consecutive outflows—a natural correction after US$29 billion of inflows in the 19 weeks prior. That outflow streak ended this week with three consecutive days of inflows totaling US$401 million, as investors saw opportunity in perceived market weakness.
In addition, short Bitcoin ETF outflows of US$28 million over the last three weeks suggest that traders increasingly believe Bitcoin has found a price floor.
