The Market Has Recovered. So Why Does Everything Still Feel So Bad?

The markets are back in positive territory for the year.

Large caps, mid caps, small caps, international stocks, bonds, real estate — most of it is now above where the year started.

And yet, that’s not what it feels like.

At the exact same time portfolios have been recovering, consumer sentiment has fallen to one of the lowest levels ever recorded. Lower than the stagflation era of the 1970s. Lower than after 9/11. Lower than during the Great Financial Crisis. Lower than during the depths of the pandemic.

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That’s a pretty strange disconnect.

On one hand, markets are healing.

On the other hand, people feel awful.

What’s driving the disconnect?

Some of it is obvious.

We’re all swimming in the same headlines every day: war, tariffs, inflation, political dysfunction, energy prices, recession fears, and now the constant drumbeat that AI is coming for everyone’s job.

It never really stops. Right now it is probably just a little worse.

So even while portfolios quietly recover, the emotional backdrop still feels negative. People are bracing for the next problem, not celebrating the rebound that’s already happened.

And honestly, that’s understandable.

But it’s also a helpful reminder: how people feel and how markets perform are often two very different things.

What history says about low sentiment

One of the more interesting things about investor psychology is that extreme pessimism has historically been a better sign for future returns than extreme optimism.

According to JPMorgan’s Guide to the Markets:

• When consumer sentiment has been at a peak, the S&P 500’s average return over the next 12 months has been 3.9%
• When consumer sentiment has been at a trough, the average 12-month return has been 24.1%

That doesn’t mean the next year is guaranteed to be great.

But it does mean this: bad feelings are not a forecast.

In fact, some of the best returns in market history have shown up when investors felt the most discouraged.

That’s easy to forget when the headlines are loud and the mood is heavy.

Headlines capture the moment, not the full story

The news is built to tell you what’s urgent right now.

It’s not built to help you think clearly about the next 10, 20, or 30 years.

That matters, especially in retirement planning.

Because if you’re retired — or getting close — your success isn’t going to come from reacting well to this week’s headlines. It’s going to come from having a plan that can absorb uncertainty without forcing bad decisions.

And the truth is, every era feels uniquely messy when you’re living through it.

We’ve had political division, wars, inflation, deflation, technological disruption, financial crises, pandemics — and in each moment, it felt like this time might be different.

But markets have a long history of adapting.

Not because they’re calm or rational every day, but because they reflect millions of people and businesses continuing to solve problems, create value, and move forward.

That’s still true today.

Why this matters for retirement

If you’re retired or near retirement, this disconnect between headlines and market performance matters for one simple reason:

You don’t want one part of your plan forcing decisions in another part of your plan.

A few guardrails can help:

• Keep 2-3 years of spending needs in cash and bonds so you’re not forced to sell stocks at the wrong time
• Rebalance on a schedule, not based on how the news makes you feel
• Build your portfolio around purpose and time horizon, so short-term volatility doesn’t hijack long-term money

When those pieces are in place, scary headlines become easier to live with.

Not because they stop being scary, but because they stop having so much power over your decisions.

Bottom line

The markets and the mood feel out of sync right now.

But in a lot of ways, that’s actually normal.

Sentiment is often darkest when uncertainty feels highest, and historically, that hasn’t always been a bad thing for long-term investors.

What matters most in retirement hasn’t changed:

patience, discipline, and a plan that doesn’t depend on reacting to the next headline.

Mark Struthers, CFA, CFP®, CEPA, RMA®

For current clients looking for a meeting:

This commentary is provided for general information purposes only, should not be construed as investment, tax, or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable, but is not guaranteed.