Investor anxiety returned to center stage this week as fresh data revealed a stunning collapse in U.S. consumer sentiment. While Wall Street managed to stabilize by Friday’s close, the economic undercurrents suggest deeper trouble ahead—especially with political paralysis and signs of froth in high-growth sectors like AI.

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Consumer Confidence Hits Second-Lowest Level on Record

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The University of Michigan’s latest consumer sentiment index plunged to 50.3 in November, marking the second-lowest reading ever recorded. Current conditions fell to an all-time low, while expectations sank back to levels last seen in mid-2022—a time of aggressive Fed hikes and recession fears.
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Driving the collapse? A combination of economic uncertainty and the ongoing federal government shutdown, which has severely limited access to economic data and clouded visibility for consumers and businesses alike.
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Interestingly, the only demographic showing an uptick in sentiment was households with significant stock market exposure, where confidence rose 11%—largely driven by recent equity gains. This growing disconnect between asset holders and the broader population underscores how sensitive sentiment has become to market performance.

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Shutdown Stalls Economic Data and Fed Outlook

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The historic government shutdown, now entering another week with no resolution in sight, has paralyzed key federal data releases, leaving investors, policymakers, and businesses flying blind.
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Without fresh employment data, inflation figures, or GDP estimates, the Federal Reserve is left in a difficult position—forced to interpret sentiment and anecdotal evidence rather than hard numbers. That data vacuum is beginning to seep into business expectations and market pricing, potentially raising the risk of a policy misstep if current conditions deteriorate faster than anticipated.

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Michael Burry Bets Against AI Darlings

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In a headline-grabbing move, famed investor Michael Burry—best known for shorting the housing market before the 2008 crisis—has disclosed large put positions against Nvidia and Palantir.
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Burry’s thesis? That current AI valuations may be priced for perfection in a market increasingly questioning tech’s ability to deliver future growth at current multiples. Both companies have been among the largest beneficiaries of the AI trade this year, with Nvidia’s meteoric rise pushing it into the trillion-dollar club and Palantir riding a wave of government AI contracts and software hype.
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By betting against them now, Burry appears to be signaling skepticism that these gains are sustainable—especially as broader macro headwinds and valuation concerns mount.

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Stocks Recover by Week’s End, But AI Trade Weakens

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Despite the negative sentiment data and rising political risk, U.S. equities staged a mild comeback into Friday’s close. The S&P 500 and Dow Jones both rose 0.3%, helped by hopes of a potential breakthrough in Washington.
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However, tech stocks lagged. The Nasdaq underperformed, weighed down by profit-taking and valuation fears in the AI sector. Tesla fell 4%, while Meta and Oracle each dropped 2%, continuing a rotation out of recent AI winners and into safer defensive names.
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Stocks like ExxonMobil, Coca-Cola, and T-Mobile all gained more than 2%, reflecting a broader shift toward defensive positioning amid economic uncertainty.

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Bottom Line

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The market’s ability to shrug off bleak consumer sentiment and a paralyzed federal government is notable—but possibly fragile. The AI trade, once considered unstoppable, is showing cracks as high-profile investors like Michael Burry raise red flags. Meanwhile, the broader economy is losing its feedback loop as data dries up.
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With sentiment plunging, government dysfunction deepening, and once-beloved tech stocks under pressure, this may be a pivotal moment for investors to reassess risk—especially in crowded trades that rely on optimism more than earnings.
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If political leaders fail to restore confidence and economic data continues to be withheld, volatility could return with force—especially if sentiment begins to drag down spending, hiring, and corporate outlooks into year-end.