Consumer Spending Defies Fears: Why Investors Should Trust Data Over Sentiment

The economic narrative of 2025 has been shaped by two competing forces: a chorus of anxieties about recession, trade wars, and a weakening dollar, and a stubborn reality of resilient consumer spending. At the Semafor 2025 World Economy Summit, Mastercard CEO Michael Miebach emphasized this dichotomy, arguing that while consumers may feel pessimistic, their wallets are still open. “They still want to make that trip,” he said, underscoring the gap between sentiment surveys and the hard data of everyday transactions. For investors, this distinction could mean the difference between panic-driven decisions and strategic patience.

The Soft Data vs. the Hard Data

The Conference Board’s Consumer Confidence Index hit 92.9 in March 2025, its lowest level since 2021, driven by fears of a potential recession and geopolitical tensions. Yet Mastercard’s real-time transaction data tells a different story. Miebach highlighted that March 2025 retail sales rose 1.4% month-over-month, a rate he called “nothing out of the ordinary.” This divergence raises a critical question: Why does sentiment lag behind action?

The answer, Miebach argues, lies in consumer adaptability. After enduring the pandemic, supply chain disruptions, and inflation spikes, households have become adept at managing uncertainty. “Consumers have learned to prioritize their spending goals,” he said, pointing to discretionary categories like travel, dining, and entertainment as evidence. Even as tariffs on imported goods and fluctuating exchange rates create headwinds, consumers are reallocating budgets rather than cutting back entirely.

Why Investors Should Care

For investors, the implications are clear: sectors tied to discretionary spending—travel, luxury goods, and hospitality—are still viable. The resilience of retail sales, despite weak confidence, suggests that corporate earnings in these areas may hold up better than headlines suggest. Meanwhile, the disconnect between sentiment and spending could mean markets are overpricing recession risks.

Consider the travel sector. Airlines, hotels, and cruise lines have faced headwinds from volatile fuel prices and labor disputes, yet demand remains robust. Mastercard’s data shows that U.S. travelers spent 6% more in March 2025 than a year earlier, even as the dollar’s decline made international trips more expensive. This aligns with Miebach’s argument that consumers are “empowered” to navigate costs, not deterred by them.

The Case Against Overreacting to Sentiment

Miebach’s emphasis on transactional data over surveys is not just a corporate talking point—it reflects a broader trend in how businesses and investors assess economic health. While confidence indices and news headlines can sway markets, they are backward-looking and often colored by fear. Real-time transaction data, by contrast, captures the present.

Take the 1.4% March retail sales increase: this growth was driven by discretionary categories like clothing (+2.1%) and furniture (+1.8%), even as core goods like electronics slowed. This granularity suggests consumers are making trade-offs but not pulling back entirely—a nuance lost in broad sentiment metrics.

Risks and Limitations

Of course, Miebach’s optimism carries risks. The Federal Reserve’s aggressive rate hikes in 2023-2024 have yet to fully filter into household budgets, and a sudden spike in unemployment could change spending habits overnight. Additionally, Mastercard’s data, while vast, excludes cash transactions and smaller purchases, potentially skewing results toward wealthier consumers.

Yet for now, the data points to a market that’s more resilient than feared. If history is any guide, the U.S. consumer has historically shrugged off short-term anxiety in favor of long-term goals—provided jobs remain plentiful. As of April 2025, the unemployment rate stood at 3.4%, near a 50-year low, reinforcing the case for cautious optimism.

Conclusion: Trust the Transactions, Not the Headlines

Investors should heed Miebach’s call to prioritize empirical evidence over fear-driven narratives. While consumer confidence has slumped to multiyear lows, the 1.4% March retail sales growth and sustained discretionary spending suggest households are still driving the economy forward. Sectors like travel and retail, which rely on this spending, could outperform if the trend continues.

Meanwhile, the stock market’s focus on sentiment risks overvaluing recession fears. Mastercard’s own stock, which tracks closely with consumer activity, has outperformed the S&P 500 by 8% over the past year—a divergence that underscores the premium placed on transactional data. For investors, this is a reminder: in a world of noise, hard data is the compass.

The next test will come in the coming months. If retail sales begin to wane alongside confidence, markets will recalibrate. But until then, the evidence suggests consumers—empowered by jobs and past lessons—are still willing to splurge on that trip.