December 2025 U.S. Consumer Sentiment Revision and Market Impact Analysis

On December 19, 2025, CNBC’s Squawk on the Street [1] reported the University of Michigan’s final December consumer sentiment reading, revised downward to 52.9 from the mid-month preliminary 53.3. This figure missed Wall Street consensus (53.5) but was 1.9 points above November’s 51.0. Year-over-year, sentiment fell 28.5% (near record lows), with survey director Joanne Hsu describing the decline as “very substantial” [2]. Notably, consumer inflation expectations for the year ahead dropped to 4.2%, the lowest in 11 months [2].

Contrary to typical market reactions to weak sentiment data, U.S. indices rallied on the announcement. The S&P 500 (^GSPC) rose 0.62%, NASDAQ Composite (^IXIC) gained 0.80%, and Dow Jones Industrial Average (^DJI) increased 0.33%. The SPDR S&P 500 ETF (SPY) mirrored the S&P 500’s 0.59% gain [0]. Tech (1.02%) and utilities (1.49%) sectors led, while energy (-1.63%) and industrials (-0.25%) lagged [0]. Visa data showed 4.2% year-over-year holiday sales growth (Nov. 1–Dec. 21), adjusting to 2.2% for inflation [4], contrasting with low consumer sentiment.

1. Market-Sentiment Divergence
   : Investors prioritized cooling inflation expectations (4.2%, 11-month low) over weak consumer sentiment, driving the market rally [0][2].
2. Inflation Expectation Impact
   : Falling inflation may reduce Federal Reserve rate hike pressure, supporting rate-sensitive sectors like tech and utilities [0].
3. Spending-Sentiment Disconnect
   : Visa’s holiday sales growth (4.2%) suggests consumer behavior may not align with reported pessimism, highlighting potential gaps in sentiment survey predictive power [4].

• Risks
  :
  • Consumer Spending Risk
    : Historical correlations link low sentiment to reduced spending, which could harm consumer discretionary sectors [0][2].
  • Inflation Uncertainty
    : The 4.2% inflation expectation remains above the Fed’s 2% target, potentially delaying rate cuts [2].
  • Market Volatility
    : The rally’s divergence from sentiment data may reflect overconfidence, increasing volatility if future data disappoints [0].
• Opportunities
  :
  • Rate Cut Potential
    : Sustained inflation cooling could prompt future Fed rate cuts, benefiting rate-sensitive stocks [0].
  • Holiday Spending Resilience
    : Strong holiday sales may support consumer-focused sector performance if the trend continues [4].

The December 2025 consumer sentiment revision presents mixed economic signals: weak sentiment (near record lows) but improving inflation expectations, positive market reactions, and resilient holiday spending. Decision-makers should monitor long-term consumer spending trends, Fed policy responses to mixed data, and sector-specific vulnerabilities. The data highlights the complexity of linking sentiment metrics directly to market performance or consumer behavior [0][1][2][4].