What a Glum Lot!

The 24/7 news cycle and algorithms designed to hold our attention in loops and echo chambers seems to be having a consistent effect since 2016. The effect is that people expect consumer sentiment to be much worse than it is. Our read is that expectations for consumer sentiment have been at levels consistent with a mild recession for most of the last twenty years. We describe the last five years as the most highly anticipated recession that never happened. Consumer confidence has steadily drifted lower over the last seven years, excepting the pandemic, and while that long steady gradual deflation in sentiment surely felt bad, expectations were far worse. Indeed, at the start of the pandemic consumer confidence dropped precipitously, simply to match where expectations already were. It is hard to imagine a prosperous, mostly peaceful country with a steadily expanding economy and copious abundances, where expectations for consumer confidence were at levels consistent with the sudden onset of a global pandemic. What a glum lot we have become!

The chart below is a graphical depiction of the last twenty years of consumer confidence in blue and expectations for consumer confidence in red.

Source:  FactSet 4.6.2026

While expectations for consumer sentiment remained gloomy, the consumers themselves have held steady as personal consumption expenditures as a percentage of GDP has remained between sixty-seven and sixty-nine percent for the last twenty years, excepting distortions from the pandemic. We recall that whenever personal consumption expenditures declined a little bit as a percentage of GDP, clickbait headlines and talking heads often amplified alarming messages such as “Consumers have stopped spending!” It seems people keep on keeping on, regardless of how they feel or expect others to feel.

Below is a chart of the last twenty years of personal consumption expenditures as a percentage of GDP.

Source: FactSet 4.6.2026

From our perspective, another example of reality not matching hyperbolic headlines and talking points can be seen in imports and exports around the extreme tariff announcements that started in April 2025. There was blustery backlash from authoritative figures in several countries threatening to boycott buying from the U.S. Imports spiked in anticipation of tariffs and possible boycotts. What happened next was inconsistent with the rhetoric. Imports steadily declined in part due to having stockpiled provisions, but it is worth considering that U.S. companies may have started onshoring an increasing amount of goods; meanwhile, exports steadily rose despite all the threats to boycott U.S. goods.

Below is a ten year chart of the year-over-year percentage change in exports (blue line) and imports (red line).

Source: FactSet 4.6.2026

Our sense is that most people do not update their mental models often enough for how things work, rather they persist in holding on to an anticipation for the future. Successful investors must continually update their mental models. Sometimes updating the mental model results in a clearer picture and higher conviction. Other times the update forces investors to admit a mistake, but quite often the result is that the view of prospects for a business becomes cloudy or too complicated. Warren Buffett’s trusted partner, the late Charlie Munger, noted that for him the list of companies where the thesis was too complicated dwarfed all other categories. If the initial thesis is too complicated, they do not invest, but the challenge they are increasingly faced with is what to do when a once clear thesis becomes cloudy. The investment thesis for Montgomery Ward certainly became cloudy and then too complicated long before it was clear that Sears, Roebuck and Company would overtake them as the nation’s largest retailer.

The three main forces that are clouding investment theses are AI, political considerations both home and abroad, and a gradual decline in growth prospects as companies borne from technology innovations of the last 30 years mature. Much has been written about AI and global politics, so we will not get into them here, though we welcome a discussion if you would like it. In the nineties and early aughts, Scott would barely look at a company that seemed likely to grow revenues organically (not through acquisition) at seven percent or less for the next five years. It seems to us that for 2026, revenue growth rates have come down. We suspect that over the last several years consumer sentiment has followed the trajectory in organic revenue growth rates of companies like Home Depot. We have not bought Home Depot for clients in a long time but follow the company as an important bellwether. We recall that several years ago Home Depot forecasted organic revenue growth of around four percent, and that forecasted number has slowly trickled lower over the years. Slide #62 of its most recent Investor Day presentation calls for only “slightly positive” organic growth. This does not mean Home Depot did anything wrong, especially in this environment, but it does shape our views of the consumer and economy. With heightened uncertainty from potential AI disruption, geopolitics, and the U.S. economy still digesting the trillions of dollars of pandemic stimulus, it makes sense for maturing companies to have had waning revenue growth. We are updating our mental models to look for less exciting growth rates at companies with lower potential for disruption from AI and geopolitics. The good news is that we are finding many interesting investments ideas.

 Redmond Asset Management, LLC April 2026

The opinions contained in the preceding commentary reflect those of Redmond Asset Management, LLC (RAM). The stated opinions are for general information only and are not meant to be predictions or an offer of individual or personalized investment advice. They also are not intended as an offer or solicitation with respect to the purchase or sale of any security. This information and these opinions are subject to change without notice. Any type of investing involves risk and there are no guarantees. Redmond Asset Management, LLC does not assume liability for any loss which may result from the reliance by any person upon any such information or opinions.

Redmond Asset Management, LLC is an independent, SEC registered investment management firm located in Richmond, VA and is not affiliated with any parent organization. RAM was founded in 2005 and registered with the SEC on December 22, 2005. The company offers investment management services for equity, balanced and fixed income portfolios to corporate, institutional, and individual investors.