After a strong slate of economic data on Thursday, today’s data continued the positive trend with a much stronger than expected sentiment report from the University of Michigan where the headline index came in at its highest level since January 2004. While economists were forecasting the index to come in at a level of 97.2, the actual reading was much stronger at 102.4. That beat relative to expectations was the biggest since October 2017. The big driver of this month’s strength was the fact that the expectations component surged 8.6 points to 96.0 from 87.4. Over the last few years, the expectations component of the UMich Sentiment report has tried unsuccessfully to break above 90, but this month it blew right through that level to the highest levels of the current economic cycle.

Not only did the expectations component make new highs relative to the last few years, but it’s also at levels not seen in over 15 years. The fact that this index is making new highs is an encouraging one as it indicates confidence about the future, and with the number of Americans feeling like they are living ‘paycheck to paycheck‘ at multi-year lows, how can you blame them?

The one head-scratcher?  It’s a bit counter-intuitive to see consumer sentiment and the probability of rate cuts from the FOMC so high at the same time!