Investors Rely on Soft Data Amid U.S. Trade Policy Volatility, Shifting from Traditional Indicators

Investors are increasingly relying on soft data, such as sentiment surveys and business confidence indexes, due to unpredictable U.S. trade policy changes under President Trump. Traditional hard data like employment figures are seen as outdated in this volatile environment. Experts like Jack Ablin and Jason Britton emphasize the timeliness of soft data, though some, like Treasury Secretary Scott Bessent, remain skeptical of its reliability. The shift is driven by frequent tariff changes, impacting economic planning and prompting a reevaluation of investment strategies.

A New Investment Playbook in a Volatile Trade Environment

The investment landscape has been upended by a series of abrupt and often contradictory trade policy announcements from the U.S. government. Since President Donald Trump’s initial tariff plans were unveiled on April 2, 2025, they have been modified, expanded, and rescinded multiple times. This policy whiplash has left investors scrambling for real-time information that can help them anticipate market movements.

Hard data—such as unemployment rates, job creation, and consumer price indexes—are typically released with a lag and reflect past conditions. In a fast-changing environment, these indicators are increasingly seen as outdated by the time they are published. As a result, investors are turning to soft data, which includes sentiment surveys, anecdotal reports, and forward-looking expectations.

“The lack of tangible information on a real-time basis means we have to rely on what the soft data is telling us,” said Jack Ablin, chief investment officer at Cresset Capital. Ablin noted that he recently prepared a client presentation based almost entirely on consumer sentiment, investor outlook, and business confidence levels.

Soft Data Gains Prominence

Soft data, while inherently more subjective, offers a timelier snapshot of economic sentiment. Consumer confidence surveys, for example, are published more frequently and with less delay than government-issued economic reports. Jason Britton, chief investment officer at Reflection Asset Management, emphasized the importance of these tools: “It’s all about the soft data: if consumers aren’t feeling good, they won’t spend and then the economy will suffer.”

Malcolm Polley, chief investment strategist at Stratos Investment Management, echoed this view, stating, “If you want to know what the future might look like, then you want to look at the soft data.” However, he cautioned against relying on it in isolation, warning that it can become “noise” without proper context.

The divergence between soft and hard data has been particularly evident in recent months. While official figures suggest the U.S. economy remains resilient—with strong employment numbers and stable consumer prices—soft data tells a different story. Surveys indicate declining consumer confidence and weakening business activity in both the services and manufacturing sectors.

Alternative Indicators Enter the Spotlight

In addition to traditional sentiment surveys, some investors are exploring unconventional data sources to gain an edge. Campbell Harvey, a finance professor at Duke University’s Fuqua School of Business, is paying close attention to prediction markets like Polymarket. These platforms allow users to bet on outcomes such as the likelihood of a recession or commodity price movements, often based on real-time conversations with suppliers, customers, and business partners.

Mike Reynolds, vice president of investment research at Glenmede, is also expanding his toolkit. He is monitoring metrics such as the number of overseas travelers visiting the U.S. to assess the broader economic impact of tariffs. According to the Commerce Department’s Bureau of Economic Analysis, foreign spending on U.S. travel fell by $1.3 billion in March—the largest drop since the pandemic.

“We do think that we need to change our approach and get creative in our approach to data to get any insight into what’s happening,” Reynolds said. “We want to look at anything that will give us an edge, because in this uncertainty doing anything—or nothing—is risky.”

A Divided View on Data Reliability

Despite the growing reliance on soft data, not all market participants are convinced of its reliability. Treasury Secretary Scott Bessent, speaking at a recent press conference, said, “I was in the investment business 35 years and I learned to ignore the survey data and look at the actual data.”

Federal Reserve Chair Jerome Powell acknowledged the growing tension between hard and soft data, stating in April that the central bank is “closely watching this tension.” The Fed is expected to announce its next interest rate decision this week.

Skeptics point to past instances where soft data sent misleading signals. In 2022, for example, consumer sentiment surveys showed a sharp decline, prompting widespread recession forecasts. However, the economy avoided a downturn, buoyed by a strong labor market and healthy household balance sheets.

“Surveys pick up more feeling rather than action, so they might not correspond to economic activity to the same extent that hard data do,” said Jan Hatzius, chief economist at Goldman Sachs. He added that soft data is more prone to false alarms, as seen in the 2022 recession scare.

The Trade Policy Catalyst

The root of this shift toward soft data lies in the unpredictability of U.S. trade policy. The Trump administration’s tariff announcements have created a climate of uncertainty that affects business planning, consumer behavior, and investment strategies. According to Deloitte’s global economic outlook, the effective tariff rates imposed by the U.S. and other governments have reached levels not seen in a century, creating a significant drag on growth.

The International Monetary Fund (IMF) has also cited trade tensions and policy uncertainty as key reasons for revising down its U.S. growth forecasts. The IMF expects a sharp decline in exports and a softer demand outlook due to slower-than-anticipated consumption growth.

In this environment, even asset prices are reflecting heightened recession risks. Deloitte reports that U.S. equity prices have fallen not only on negative GDP news but also on weak earnings and the broader uncertainty surrounding trade negotiations.

A Shift in Investor Behavior

The current climate has led to a fundamental shift in how investors interpret economic signals. Traditional models that rely heavily on hard data are being supplemented—or in some cases replaced—by more agile, sentiment-driven approaches.

As one analyst put it, “Every event or data point has a very large influence on prices and causes volatility.” In such a setting, the ability to interpret soft data effectively becomes a competitive advantage.

While the debate over the reliability of soft versus hard data continues, one thing is clear: in a world of policy unpredictability and rapid change, investors are adapting their strategies to stay ahead.

References

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