Tracking Retail Sentiment: How Consumer Confidence Shapes Stock Performance of Target, Ross, and Best Buy

Examining the Relationship Between Retail Stock Performance and Consumer Sentiment

Research Focus

This article explores whether a meaningful relationship exists between U.S. retail stock prices and shifts in consumer sentiment. The focus is on three major retail companies—Target (TGT), Ross Stores (ROST), and Best Buy (BBY)—over the period from early 2023 to April 2025. The aim is to determine if these stock price movements have aligned with consumer confidence trends during the same timeframe.

By studying both market behavior and sentiment dynamics, this analysis contributes to a deeper understanding of how investor perception and consumer mood can potentially move in tandem—or diverge—within the retail sector.

Understanding the Michigan Consumer Sentiment Index

Before diving into the comparison, it's important to understand the metric at the center of this analysis. The Michigan Consumer Sentiment Index, published monthly by the University of Michigan, reflects the public's expectations of the economy. It gauges views on personal finances, inflation, unemployment, interest rates, and business conditions.

Investors and analysts often use the index as a leading indicator of consumer spending behavior. When sentiment is improving, consumers are generally more willing to spend, which can drive retail performance. Conversely, declining sentiment may lead to more conservative spending habits, potentially hurting retail sales and stock valuations.

Consumer Sentiment Trends from 2023 to 2025

Between 2023 and early 2024, the consumer sentiment index experienced a sustained period of improvement. This uptick was associated with easing inflation, a relatively strong labor market, and improving macroeconomic confidence.

However, starting from around mid-2024, the momentum stalled. For several months, the index moved sideways, reflecting uncertainty in consumer attitudes. By late 2024 into 2025, sentiment began to weaken steadily—possibly in response to renewed inflationary pressures, rising interest rates, or geopolitical instability—leading into a more pessimistic economic outlook by April 2025.

Why These Three Retailers?

The retailers selected—Target (TGT), Ross Stores (ROST), and Best Buy (BBY)—represent a cross-section of U.S. consumer-facing companies in the discretionary spending category. Each has different market positioning:

• Target operates as a broad-spectrum discount retailer, with a significant share in both essentials and discretionary items.

• Ross Stores focuses heavily on discount fashion and home goods, targeting price-sensitive consumers.

• Best Buy is a specialty retailer for electronics and appliances, with customer demand closely tied to economic confidence and discretionary income.

These companies were chosen not only for their differing customer bases and product mixes but also because they are highly responsive to consumer demand fluctuations, making them ideal candidates for correlation analysis.

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Target Corporation: Tracing the Price Behavior

Target's price performance reflected considerable volatility across the observed period. The first major segment saw the stock decline throughout much of 2023, consistent with a consumer environment still recovering from inflation and rising interest rates.

This was followed by a strong period of price recovery extending into the first half of 2024. During this time, the improving consumer sentiment likely played a supporting role in lifting investor expectations and stock valuation.

However, the uptrend was short-lived. A combination of tepid consumer spending and growing macroeconomic uncertainty led to a decline in Target’s stock later in 2024. The movement in stock price during late 2024 into 2025 aligned with the broader deterioration in consumer sentiment, suggesting a return of investor caution as outlooks turned more negative.

Ross Stores: Capturing the Discount Retail Cycle

Ross Stores presented a slightly different rhythm. Early in 2023, the stock was in a downward trajectory, possibly reflecting investor concern over the state of discretionary spending. However, it rebounded significantly and maintained a steady upward pace well into early 2024, echoing improvements in consumer sentiment and optimism about discount retailers benefiting from more cautious household budgets.

The subsequent flattening of price action came as the consumer sentiment index plateaued in mid-2024. This alignment indicates that investor enthusiasm may have cooled once sentiment stopped improving. Finally, as sentiment took a clear turn downward in early 2025, Ross’s stock began to trend downward again.

The broad directional movement of Ross Stores across this period suggests a meaningful sensitivity to shifts in consumer expectations, with price movements potentially serving as a real-time barometer of spending comfort levels.

Best Buy: A Case of Choppy Alignment

Best Buy’s stock exhibited more frequent transitions and a less clearly defined trajectory than the other two. After a decline in 2023, the stock staged a recovery later in the year. However, multiple short-term swings throughout late 2023 and early 2024 point to more volatile investor reactions—possibly a reflection of the higher exposure to discretionary technology spending.

The sideways movement that followed, roughly overlapping with the neutral phase of the Michigan Index, points to a lack of directional conviction from investors. By early 2025, as consumer sentiment weakened, Best Buy’s stock also moved downward—adding weight to the idea that deteriorating confidence had begun to affect outlooks for tech-driven retail.

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Interpreting the Correlation

When placed side by side, the three retailers exhibited a general alignment with the broader consumer sentiment trend:

• Periods of rising consumer sentiment were generally accompanied by stock price appreciation, especially in the around mid-2023 to early 2024 window.

• Sideways sentiment phases coincided with flatter or choppier stock performance, suggesting uncertainty on both consumer and investor fronts.

• Declines in sentiment toward late 2024 and early 2025 were mirrored by weakening stock trends across all three companies.

While the correlation was not perfect—due in part to company-specific dynamics, sector-specific news, and broader market conditions—the broad patterns were supportive of the view that sentiment acts as a useful macro context when evaluating retail stock price behavior.

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Final Reflections

This analysis suggests that the Michigan Consumer Sentiment Index does have some explanatory power when analyzing retail stock movements—particularly among discretionary-focused companies like Target, Ross Stores, and Best Buy. Periods of rising sentiment tend to provide a backdrop for positive stock performance, while falling sentiment tends to precede or coincide with price declines.

For investors, the takeaway is clear: although sentiment shouldn’t be used in isolation, it remains a valuable contextual tool for interpreting retail trends and anticipating changes in investor expectations.

 

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