Macro Monday: Tariff Takeaway from our Meeting; Consumer Spending Velocity Fine but Muted; Subtrends Analysis shows Value > Premium

By David Schick and Jonathan Feeney and David Katzman and Jack Hermann Published on February 23, 2026 PDF

We discussed the SCOTUS tariff ruling in our meeting with Ted Gayer, President of Niskanen Center and former Head of Brookings Institution Economic Studies Program last Friday 2/20. The weekend then brought 2 new broad-based tariff levels pushed by the administration. In our meeting we discussed impacts both mathematic (new pathways are flatter and for a discrete amount of time) and thematic (there is not one mechanism for US trade negotiations). Gayer expects legal challenges and more nuanced pathways to emerge.

Consumer Velocity remained positive for the 8th consecutive week, up +2.1%. This metric was running -1.6% y/y in mid-December but was up +3-4% in 3Q25 and run rate is more muted than spending growth seen since Covid. Our analysis of the trailing 4-week moving average of sales at 133 retailers and consumer concepts is running up +2.1% y/y (0.5 standard deviations below average since the start of 2022). The trailing Consumer Velo 12-week trend is up +0.8% y/y, its highest level since late November (1.3 standard deviations below average) vs. +0.5% y/y last week, leading to a shorter vs. longer-term inflection of +1.3% (0.9 standard deviations above average). See Fig 1-2.

We note Value spending trend has more momentum than Premium spending, we see this tied to comparisons and persistent lower gas prices y/y. This is particularly interesting in early 2026 with white collar unemployment increasing and our AIR (AI-Resistant) names from Consumer Staples. We use a combination of consumer spending and psychographic monitoring to track “trade up” and “trade down” trends. Optimal’s premium monitor is running up +1.2% y/y on a T4W basis and down -0.2% y/y on a T12W basis, running 490 bp (1.1 standard deviations below average) and 400 bp (1.0 standard deviations below average) respectively below our Value Monitor, which is running up +6.1% y/y on a T4W basis and up +3.8% y/y on a T12W basis. See Fig 3-6.

Consumer housing “kinetic energy” continues to show better early signs for more robust 2H26 activity. Refinance applications higher as mortgage rates move to the lowest level since late 2024. US 30Y FRM rate continues to run down, now running down -82 bps y/y on a T4W basis (1.0 standard deviations below average since 2020) and at only 6.01% for the most recent week. MBA’s mortgage applications for purchase continue to run up +9% y/y while refinance applications running up +132% (a low base, but a necessary step to create eventual velocity). Median home prices are flat y/y (-1.3 standard deviations below average since 2020). Roughly 18% of Americans sell, build, fix, lend to, and furnish homes – velocity matters for the economy. See Fig 7-10.

Gasoline prices continued meaningful y/y declines – this can lead to more vehicle miles travelled (with weather, this can drive auto parts demand inflection). Gas prices ran down -7.3% y/y on a T4W basis and are down -6.4% y/y on a T12W y/y basis, corresponding to a -1.0% inflection between shorter- and longer-term trends (0.2 standard deviations below average). We have had lots of recent conversations on oil and fuel prices due to developments in Venezuela. Markets are mixed on that thus far. Generally, lower-income consumers spend about 5% of their total spend on fuel, and higher-income consumers spend about 2.5% – so a 10% move in gas prices drives 25-50 bp headwind or tailwind. Utilities (electricity and heating fuel) run from about 9% of lower-income household spending to 4% for higher-income households. Duration of change matters – eventually causing Consumer Sentiment shifts, which then drive more or less discretionary spending. On the cost side, Feeney noted last week that the Optimal Cost Factor continues to work lower, down -12.0% y/y. Broad-based commodity price declines have pushed many measured ticker & sector cost indices lower. See Fig 11-12.

Rate of change is less bad for Consumer Sentiment as it is now down -21% y/y over the past three months, but is only down -13% y/y in February for all respondents -9% for higher-income respondents. Overall, headline Sentiment has declined -21% y/y on a T3M basis (1.7 standard deviations below average) and -19% y/y on a T9M basis (1.8 standard deviations below average). This compares to -20% y/y on a T9M basis last month, marking the third month since late 2024 and fourth month since early 2024 where longer-term Sentiment y/y did not decrease from the prior month. Upper-third income Sentiment has declined -22% y/y on a T3M basis (1.6 standard deviations below average), after declining -29% y/y T3M last month. Middle-income Sentiment has declined -19% y/y on a T3M basis (1.5 standard deviations below average) compared to -26% last month, and lower-income Sentiment has declined -22% y/y on a T3M basis (1.9 standard deviations below average) compared to -25% last month. See Fig 13-16.

Consumer Wealth Effect Index still below historical average, driven by lower crypto prices and equity returns. Optimal Advisory’s Wealth Effect Index is at 8.8% y/y (0.1 standard deviations below average since the start of 2022). This metric was running +15.4% y/y in October 2025. With home prices flat y/y and crypto returns sharply down in recent weeks we note the “flywheel” of wealth effect is more muted. See Fig 17-20.

Multifactor Macro Market Model suggestive of softness, rebound. Optimal’s Multifactor Macro Market Model projects the S&P 500 as well as bull and bear cases based on lagged data for 12 macroeconomic factors. The model suggests the S&P 500 to fall to just below 6000 by next March, before rebounding back up to 6400 by May. We use this model as a guide to how macro would guide the market, given our analysis of current variables. This is, of course, outside of other factors at work. See Fig 21-22.

In this weekly note, we focus on key changes in the US consumer’s real-time dynamics (70% of the US economy). We also calculate and present the extent to which current dynamics are “non-normal”, relative to historic patterns. See Fig 23 for sector market performance.

Figures 1-2: Optimal Advisory Consumer Velocity Monitor

Source: Optimal Advisory Analysis, Bloomberg Second Measure

Consumer Spending y/y Relative to Historical Average

Source: Optimal Advisory Analysis, Bloomberg Second Measure

Figures 3-6: Optimal Advisory Premium vs Value Monitor

Source: Optimal Advisory Analysis, Bloomberg Second Measure, Google Trends

Optimal Advisory Premium vs Value Indices Relative to Historical Averages

Source: Optimal Advisory Analysis, Bloomberg Second Measure, Google Trends

Figures 7-10: Housing Kinetic Energy

Source: Optimal Advisory Analysis, Freddie Mac, Zillow, Redfin

Mortgage Rates, For Sale Inventory, & Median List Price y/y Relative to Historical Averages (Since 2020)

Source: Optimal Advisory Analysis, Freddie Mac, Zillow, Redfin

Figures 11-12: Gas Prices y/y

Source: Optimal Advisory Analysis, U.S. Energy Information Administration

Gas Prices y/y Relative to Historical Averages (Since 1992)

Source: Optimal Advisory Analysis, U.S. Energy Information Administration

Figures 13-16: Consumer Sentiment T3M and T9M y/y

Source: Optimal Advisory Analysis, University of Michigan Consumer Survey

Sentiment y/y by Income Tercile Relative to Historical Averages

Source: Optimal Advisory Analysis, University of Michigan Consumer Survey

Comparison of Sentiment y/y Across Income Terciles

Source: Optimal Advisory Analysis, University of Michigan Consumer Survey

Figures 17-20: Consumer Wealth Effect & Components y/y

Source: Optimal Advisory Analysis, Bloomberg, Zillow, Redfin

Median Home Price y/y, S&P 500 y/y, & Wealth Effect Index (Since 2022)

Source: Optimal Advisory Analysis, Bloomberg, Zillow, Redfin

Figures 21-22: Optimal Advisory Multifactor Macro Market Model

Historical Test Predictions vs. Actual (On Test Data Only)

Source: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, BLS, BEA, OECD, University of Michigan Consumer Sentiment Survey, U.S. Census Bureau, FRB

Actual & Projected S&P 500 (Including Training & Test Data) with Confidence Intervals

Source: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, BLS, BEA, OECD, University of Michigan Consumer Sentiment Survey, U.S. Census Bureau, FRB

Figure 23: Index & Sector Performance

Source: Optimal Advisory Analysis, Bloomberg, prices intraday 2/23/2026

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