Riding the Election High

Consumer Sentiment & Washington D.C.

Sara J Wells
8 min readMay 27, 2021
Image Source

What do ice cream sales and crime rates have in common?

They both increase during the summer. As the heat strikes year over year, so do our feet on the pavement as they swarm to the ice cream truck for some sweet relief. Meanwhile, the long days and the aggravating heat create opportunities and irritation that get those blue and red sirens running.

This consistent pattern establishes a statistical relationship between two seemingly unrelated variables. What is not established is a causal relationship. If ice cream consumption and violent acts shared a cause-and-effect relationship, this would mean that a) eating ice cream makes you violent or that b) acting violently makes you very hungry for ice cream. While this may be possible, it is not probable nor established as a causal relationship. Rather, the increasing rates are more likely caused by the rising temperatures.

In the marketplace, investors and economists examine the correlation and potential cause-and-effect relationship between economic indicators and current events. For today’s conversation, we will be examining the relationship between consumer sentiment and major political events.


What is consumer sentiment? A category of economic indicator that statistically measures the overall health of the U.S. economy as determined by the U.S. consumer’s opinion.

How does it relate to major political events? As a subjective measure, consumer sentiment captures an individual’s response to current events at the individual and macro level and relies on their understanding, conscious or subconscious, of both traditional and behavioral economics.

Let’s look back to the 2016 and 2020 general election seasons. Representing infamously bipartisan periods, we witnessed a partisanship-based shift in consumer sentiment on the toes and heels of the election results. Headlines far and wide showcased consumer sentiment as a reactive metric to the outcome of the presidential election with the tone of reporting changing in line with the subjectiveness of the measure itself.

Consumer sentiment’s political ties are not uncommon in the indicator’s history. In consideration of their well-established correlation, we should approach their causal relationship and its perceived impact on the economy and policies with a critical lens.

How much of the feeling is riding the high of the new president’s First 100 Days? Does the causal impact go both ways? Politicians influencing sentiment? Sentiment influencing policy? How is the effect of sentiment realized in actual consumer spending?


As of April 1, 2020, the U.S. resident population came in at approximately 332.5 million people across the nearly 380 square miles within our borders.

In an attempt to capture an average consumer sentiment representative of the general U.S. population, public polls are conducted by multiple independent institutions. Economists use two primary measures: the Consumer Confidence Index® (CCI) published by The Conference Board by Nielsen and the Michigan Consumer Sentiment Index (MCSI) published by the University of Michigan. These institutions conduct regular and controlled polls across varying, random samples of survey participants in an attempt to snapshot the general feeling of our population at that point in time.


Updated monthly, the CCI is calculated from the Consumer Confidence Survey® (CCS) released cyclically on the last Tuesday of every month. The CCS is composed of five static questions to which 3,000 survey participants respond with a positive, neutral, or negative sentiment.

The Present Situation Index is based on consumers’ assessment of the current business and labor market environment while the Expectations Index examines their short-term outlook for income, business, and labor market conditions (The Conference Board, 2021).

Once the data is collected, the resulting score for each question is calculated as a relative value against 1985, the first year the index was calculated (1985 = 100 score). The aggregate score quoted by financial analysts is the CCI score. This score is supported by its underlying index scores.

Let us look at the April 2021 CCS results. Between March and April, the CCI score increased a healthy 12.7 points to 121.7. While the Present Situation Index soared from 110.1 to 139.6 while the Expectations Index rose modestly from 108.3 last month to 109.8 in April (The Conference Board, 2021). In layman’s terms, the overall boost in consumer confidence was heavily weighted by consumer’s positive sentiment about the current economy with less confidence expressed about the six-month outlook.

The Conference Board’s summary of the April 2021 Consumer Confidence Survey® results is available for your reference at the end of this article.


Consumer sentiment has matured into a widely adopted economic barometer influencing U.S. public and economic policy since its mid-20th century inception and adoption. We see that elections and politicians sway consumer’s understanding of and reaction to the unfolding market environment. We know that consumer polling impacts campaign platforms and executive and/or legislative responses to market dynamics. However, the realized impact on the economy’s bottom line is shaky.

Let’s add a third element into the mix: consumer spending as a percentage of GDP. The below table shows an incompatible reality of divergent velocities between subjective consumer sentiment and objective consumer spending.

Sources: (The Conference Board, 2021), (U.S. Bureau of Economic Analysis, 2021)

We see volatile consumer sentiment against a stable history of consumer spending as a percentage of U.S. GDP. With less than a 4% variance, consumer spending has consistently clocked in at over 65% of GDP since 1999. Over the last decade, it hit a high of 68.7% in Q1 2011 with a low of 67.1% in Q2 2020 (U.S. Bureau of Economic Analysis, 2021). Basically, not even a little bit of change despite a lot of bit of hype.

This contrast of the subjective and objective sides of the same coin leaves us with a trinket for thought. Election or no-election, what weight should we give consumer sentiment as an indicator of economic health if the spikes and divets in our sentiment are not even loosely matched by relative changes in actual spending?


Ultimately, this is about unlinking the false causal attachment between swings in our sentimental current assessment and outlook on the market as they are correlated to the independent events of Washington D.C. While there is a causal relationship, it is disproportionately viewed and valued in a vacuum without considering other (objective) factors, such as consumer spending as a percentage of GDP.

What are other indicators, then, that we can consider when calculating our own current and projected sentiment? We will leave you with a couple of ideas. Give us a call to discuss them more.

US Consumer Confidence Up Sharply Again in April

The Conference Board Consumer Confidence Index® Climbs to Highest Level since February 2020

The Conference Board Consumer Confidence Index® rose sharply again in April, following a substantial gain in March. The Index now stands at 121.7 (1985=100), up from 109.0 in March. The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — soared from 110.1 to 139.6. The Expectations Index — based on consumers’ short-term outlook for income, business, and labor market conditions — rose moderately, from 108.3 last month to 109.8 in April.

The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was April 16.

“Consumer confidence has rebounded sharply over the last two months and is now at its highest level since February 2020,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions improved significantly in April, suggesting the economic recovery strengthened further in early Q2. Consumers’ optimism about the short-term outlook held steady this month. Consumers were more upbeat about their income prospects, perhaps due to the improving job market and the recent round of stimulus checks. Short-term inflation expectations held steady in April, but remain elevated. Vacation intentions posted a healthy increase, likely boosted by the accelerating vaccine rollout and further loosening of pandemic restrictions.”

Consumers’ appraisal of current conditions improved significantly in April. The percentage of consumers claiming business conditions are “good” increased from 18.3 percent to 23.3 percent, while the proportion claiming business conditions are “bad” fell from 30.1 percent to 24.8 percent. Consumers’ assessment of the labor market also improved. The percentage of consumers saying jobs are “plentiful” increased from 26.5 percent to 37.9 percent, while those claiming jobs are “hard to get” declined from 18.5 percent to 13.2 percent.

Consumers’ optimism about the short-term outlook improved moderately. The percentage of consumers expecting business conditions to improve over the next six months rose marginally, from 40.3 percent to 40.5 percent, while the proportion expecting business conditions to worsen stood relatively unchanged at 11.9 percent. Consumers’ outlook regarding the job market was slightly less upbeat. The proportion expecting more jobs in the months ahead fell from 35.9 percent to 34.5 percent, while those anticipating fewer jobs rose from 14.4 percent to 15.5 percent. Regarding short-term income prospects, 17.9 percent of consumers expect their incomes to increase in the next six months, up from 15.4 percent in March. Those expecting their incomes to decrease fell to 10.9 percent, down from 12.6 percent.

Source: April 2021 Consumer Confidence Survey®. The next release is Tuesday, May 25 at 10 AM ET.


Bartash, J. (2020, October 30). Consumer sentiment rises in late October as Democrats anticipate Biden victory. Retrieved from MarketWatch: https://www.marketwatch.com/story/consumer-sentiment-rises-in-late-october-as-democrats-anticipate-biden-victory-11604067606

Laya, P. (2016, November 23). Consumer Sentiment in U.S. Jumps After Trump Election Victory. Retrieved from Bloomberg: https://www.bloomberg.com/news/articles/2016-11-23/consumer-sentiment-in-u-s-jumps-after-trump-election-victory

OECD. (2021, April 29). Consumer confidence index (CCI). Retrieved from OECD: https://data.oecd.org/leadind/consumer-confidence-index-cci.htm#indicator-chart

The Conference Board. (2021, April 27). US Consumer Confidence Up Sharply Again in April. Retrieved from The Conference Board: https://conference-board.org/data/consumerconfidence.cfm

U.S. Bureau of Economic Analysis. (2021, April 30). Shares of gross domestic product: Personal consumption expenditures [DPCERE1Q156NBEA]. Retrieved from FRED, Federal Reserve Bank of St. Louis: https://fred.stlouisfed.org/series/DPCERE1Q156NBEA



Sara J Wells

blockchain-enamored | wall street escapee | digging into puzzles that interest me