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    The US Michigan consumer sentiment index fell short of forecasts in February, coming in at 56.6 versus 57.3 expected

    by VT Markets
    /
    Feb 20, 2026
    The University of Michigan Consumer Sentiment Index for the United States was 56.6 in February. This was below the expected level of 57.3. The lower-than-expected reading of 56.6 is a clear warning sign. It suggests consumers may be pulling back, which could slow the broader economy. We will be watching for higher market volatility. This could make options strategies that benefit from bigger price moves—such as VIX calls—more attractive in the near term.

    Implications For Fed Policy

    This weak data point challenges the Federal Reserve’s recent message. The January CPI report showed inflation is still stubborn at 2.8%, which pushed markets toward the “higher for longer” rate view. Now, it may make sense to consider trades that position for a more cautious Fed, such as buying 10-year Treasury note futures. For stock indices, this update is bearish. During 2025, dips in consumer confidence often came before market pullbacks, as traders priced in weaker corporate earnings. It may be prudent to start buying protective puts on the S&P 500 or Nasdaq 100 in the coming weeks. We can also narrow the focus to consumer-related sectors. Companies that sell non-essential goods tend to be most exposed, so we are considering puts on the consumer discretionary ETF (XLY). In contrast, consumer staples (XLP) may hold up better, which could make a pairs trade worth considering. Create your live VT Markets account and start trading now.

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