The “hardliners” versus the “softliners”; who will win?

No, I'm not going to talk to you about wrestling. This is about the US economy. Throughout this year, we've seen a divergence between information predicting a sharp decline in growth (even a recession) and information showing a very robust economy.

This divergence is one of the epicenters of current uncertainty in the markets.

Let me explain. Among the range of information published, there is so-called "soft" data, which consists of perception or expectation indicators collected through surveys of consumers, business owners, or investors.

Examples of such data include consumer confidence indices (such as the University of Michigan), manufacturing and services sector supply and management indices (PMI, ISM), or inflation expectations surveys.

These data don't directly measure a tangible economic variable, but rather "sentiment" about the economy. Because they come from surveys, they are typically available more quickly, so they are often used as early signals about economic developments.

There are also quantitative indicators that directly reflect real economic activity. They are based on concrete, measurable figures, such as the Gross Domestic Product (GDP), the unemployment rate, industrial production, retail sales, or durable goods orders.

This is known as "hard" data. These data are collected through official surveys, administrative records, or censuses and are often delayed in publication, as they require time to be processed accurately.

Therefore, although they are more reliable, they can reflect the state of the economy more accurately, but with a certain lag.

The relationship between hard and soft data is key to interpreting the current and future state of the economy. Although soft data doesn't always translate into real actions (such as investment or hiring), it often anticipates the movements of hard data.

For example, if employers report in a survey that they expect higher demand in the coming months, they are likely to increase production or hiring afterward, which will eventually be reflected in the hard data. However, this relationship is not perfect, which is why analysts compare both types of data to detect discrepancies: if perceptions improve but the hard data remain weak, there may be uncertainty or, in some cases, excessive optimism.

Since the beginning of the year, and even more so since the start of the Trump administration, economic agents have been faced with a harsh reality: the threats of arbitrary and high tariffs being imposed on many countries have become a reality, and the potential magnitude of such a measure in the first four months of the year is high.

Furthermore, the activity of the Department of State's Efficiency and Budget (DOGE) agency raised concerns by cutting public spending in many areas, some of which are highly sensitive, such as health and education.

The combination of potentially slower growth, shortages of goods, and rising prices generated very negative sentiment among producers and consumers.

Perception surveys plummeted in both arenas, as market participants looked with concern at the possibility of an abrupt and painful decline in the pace of economic activity.

However, the "hard" data has not reflected such an effect. On the contrary, GDP growth in the first quarter fell less than expected (-0.3% vs. -2.5% expected); job creation remains positive, and above 120,000 jobs per month, consumption and retail sales have not collapsed and remain positive.

We're entering May with investor apprehension fueled by survey data that remains negative, while hard data reflects a healthy economy.

Where things are headed. An interesting signal was released yesterday by the Conference Board: Consumer confidence reached 98.0 points, ending a five-month downward trend; significantly higher than both the April figure (85.7 points) and the market consensus (87.1 points).

The possibility of trade deals and the approval of President Trump's proposed tax package appear to have reversed the negative sentiment among investors and point to a triumph of "hard" data.

The recent enthusiasm in the stock market and the expectation that the Federal Reserve will be slow to cut interest rates are evidence of this.

Will the improvement in the polls be sustainable? Or will new episodes of risk aversion be triggered by unexpected public policy decisions or proposals from President Trump? We shall see.

*Rodolfo Campuzano Meza is the general manager of INVEX Investment Fund Operator.