The avalanche of political events the last couple of weeks has had limited impact on consumer sentiment. Yet July's final index did rise 4 tenths to 66.4 from the mid-month flash to imply a nearly 67-point level in the last half of the month and perhaps a very marginal uptick.

Compared to June, the index is down nearly 2 points and remains depressed, which the report attributes to the effect of high costs especially for lower income households. As far as politics go, the report warns that upcoming readings may prove volatile as the November election approaches.

Though costs are high, inflation expectations are fully anchored and open a door to a Federal Reserve rate cut. Year-ahead expectations are at 2.9 percent which is down from June's 3.0 percent while 5-year expectations are steady at 3.0 percent where it has settled for the last four months in a row.

Two weeks of high political drama are not expected to affect July's final reading for consumer sentiment, which is expected to hold at the preliminary reading of 66.0 that was more than 2 points below June. Year-ahead inflation expectations for final July are expected at 2.9 percent, also unchanged from the preliminary report.

The University of Michigan's Consumer Survey Center questions households each month on their assessment of current conditions and expectations of future conditions. Preliminary estimates for a month are released at mid-month and are based on about 420 respondents. Final estimates are released near the end of the month and are based on about 600 respondents.

The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer sentiment index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.