Investor sentiment and investor outcomes have been moving in opposite directions for most of this year, and this month the split reached one of its widest points on record.
The University of Michigan Surveys of Consumers put its September index at 48.1, a four-month low, down from 51.7 in August and 55.1 a year earlier. Over the same twelve months, the TSX Composite closed at 35,800.89 on September 25, up roughly 19 percent from its September 2025 level near 30,023. Sentiment fell as the index that sentiment is supposed to track rose.
Michigan sentiment and the TSX Composite have moved in opposite directions in eight of the past thirteen months, and September pushed the gap toward its widest point of the year.
Consumer sentiment sits within a point of its 2026 cycle low even as the TSX Composite gained roughly 19 percent over the trailing year, a gap that has held for eight of the past thirteen months. Source: University of Michigan; TMX Group.
The Sentiment Gauge Has Not Tracked the Market Once This Year
Consumer sentiment moved against the TSX Composite direction in eight of the past thirteen months, according to a series constructed from University of Michigan releases and TMX Group closing data. Michigan year-ahead inflation expectations climbed to 4.6 percent in September, the highest reading since June, as households weighed gasoline prices tied to the conflict in the Middle East against a portfolio statement that, for most Canadian holders of the TSX, would have shown a double-digit annual gain.
The two series diverged sharply from March 2026, when the Iran war escalated and Brent crude spiked above $110. Sentiment fell through the spring to a record low of 44.8 in May, even as the TSX pushed through 34,000 for the first time.
Why Recent and Vivid Beats Cumulative and Slow
Tversky and Kahneman, writing in 1973, named this the availability heuristic: people judge how likely or how large a risk is by how easily an example comes to mind, not by the underlying frequency. A tanker war headline, a bond-yield chart hitting a multi-year high, and a gas pump reading over $1.60 a litre are all vivid and recent. A year of compounding index returns, delivered a few tenths of a percent at a time across 250 trading days, is not.
The mechanism explains why the gap has not closed on its own. Each fresh oil spike or bond selloff resets the availability clock, giving households a new vivid data point to weigh against an old and comparatively unmemorable one, the actual one-year statement return. Barber and Odean have documented the practical cost of this asymmetry directly: individual investors who trade on salient, recent news underperform those who do not, largely because they buy and sell at exactly the moments availability is most distorted.
What the Gap Looks Like Up Close
The widest single-month divergence came in February 2026, when the TSX gained more than 7 percent on a rebound in bank and energy names while Michigan sentiment held flat near 56.6. By April, the relationship had inverted entirely: sentiment fell to 49.8 as the war headlines intensified, while the TSX added another 3.6 percent for the month.
Bond markets showed the same pattern of recency dominance last week. The MOVE index, which tracks Treasury volatility, jumped from 80 to 104 between Tuesday and Thursday on hawkish comments from a Federal Reserve governor and a hot purchasing managers report, then eased back as oil pulled off its highs into Friday. The week ended with the S&P 500 up 1.2 percent and the TSX little changed, a result that would not have been guessed from the intensity of the week as it was being lived.
None of this makes the sentiment reading wrong on its own terms. It measures how households feel, not how their accounts performed. The distance between the two, at its widest since the record 44.8 low in May, is the story.