By SUZANNE MCGEE
Whipsawing US trade policies are forcing some investors to lean more on anecdotal data to help them make decisions, as concrete official indicators become out-of-date too quickly in the rapidly changing environment.
Dramatic shifts in policy, such as US President Donald Trump’s tariff announcements last month, mean so-called hard indicators, including quantitative metrics like unemployment rates, job creation, retail sales and prices, are of limited use when they are released.
That is prompting investors to increasingly take cues from sentiment surveys or anecdotal “soft data”, which may be more subjective but offer a more up-to-date read on conditions.
“The lack of tangible information on a real-time basis means we have to rely on what the soft data is telling us,” said Jack Ablin, chief investment officer at Cresset Capital.
He said he was preparing a client presentation based almost entirely on data about consumer sentiment, investor outlook and business confidence levels. “I can’t think of too many environments that have been like this.”
Trump’s tariff plans, first announced on April 2 and modified, expanded and rescinded many times in the weeks since then, have shaken up business as usual on Wall Street.
While hard data on employment and consumer prices suggest the economy remains resilient, soft data paints a different picture on consumer confidence and the level of business activity in both services and manufacturing.
Investors look at both data sources, although in times of pronounced uncertainty tilt in favor of soft data.
“It’s all about the soft data: if consumers aren’t feeling good, they won’t spend and then the economy will suffer,” said Jason Britton, chief investment officer of Reflection Asset Management, adding that consumer sentiment surveys are published “in nearly real time” rather than with a lag.
“If you want to know what the future might look like, then you want to look at the soft data,” agreed Malcolm Polley, chief investment strategist for Stratos Investment Management. But he added, “don’t pay attention to it in a vacuum or it just becomes noise.”
Signals sent by hard and soft data can diverge and sometimes fail to paint an accurate picture of what lies ahead. In 2022, when consumer sentiment surveys showed plunging confidence, forecasts of a recession abounded.
But a tight labor market and stronger household balance sheets meant consumers kept spending and no recession materialized.
Liz Ann Sonders, chief investment strategist at Charles Schwab, expects the hard data this time around to confirm the worsening in conditions but notes there will be a lot of noise to cut through.
“We’re going to see a lot of funky data that you’re going to have to go through with a fine-tooth comb,” she said.
