Consumer confidence and stock markets usually move in tandem. However, the current gap between the two is "uncharacteristically wide", says Morgan Stanley, and may prove to be an issue this earnings season.

Stocks fell last month but investors remain in buy-the-dip mode. In contrast, consumer confidence has tanked since peaking in July.

What’s driving the investor–consumer gap? Investors, says Morgan Stanley, largely see inflation pressures as transitory and are pegging inflation expectations around 2.5 per cent. In contrast, consumers are worried, anticipating prices rising 4.6 per cent.

Weak consumer sentiment could curb discretionary spending, hurting earnings in the process. Consequently, investors “should pay close attention to whether consumer sentiment and market metrics reconverge”.