US consumer sentiment hints at tentative rebound but inflation expectations still elevated

US consumer sentiment appears to have started 2026 on a slightly firmer footing.

January’s latest readings from the University of Michigan Surveys of Consumers’ headline Index of Consumer Sentiment moved higher in January from December, with both current conditions and expectations improving. However, all major sentiment measures remain well below where they stood a year ago, showing that many households still feel strained by prices and economic uncertainty.

The data points to cautious rather than robust optimism as while consumers appear somewhat less pessimistic than late last year, confidence remains historically subdued. Persistent inflation concerns and lingering employment anxiety continue to cap enthusiasm, keeping spending behavior and risk tolerance in check.

A separate University of Michigan report on long-run inflation expectations provides further context.

While expectations have cooled from mid-2025 highs, they remain elevated relative to pre-pandemic norms. Households continue to anticipate higher-than-historical inflation over the long term, and the range of expectations across consumers signals ongoing uncertainty about the future path of prices.

Taken together, the two reports suggest inflation psychology is easing only gradually. Extreme inflation fears have faded, but confidence that price pressures will fully normalize remains limited. This environment can influence client behavior, from spending habits to portfolio risk preferences, making sentiment and expectations key indicators for advisors to monitor.

Eric Teal, CIO at Comerica Wealth Management shared his perspective on the January Consumer Sentiment data and its investment implications with InvestmentNews:

“The US consumer has been justifiably paranoid about inflation and an erosion of purchasing power. As the inflation data has started to roll-over, consumer sentiment has shown improvement. If the tariffs and trade worries moderate and employment concerns stay contained, we expect sentiment to continue to improve. In response, we have been re-examining opportunities in consumer staples that offer predictability, yield, and attractive valuations,” Teal said.