This paper investigates the relationship between managerial sentiment and sector returns. Using UK monthly data from January 1985 to December 2014 and a sample of consumer and business conﬁdence indicators provided by the European Commission, we provide novel evidence on how managerial and consumer sentiment indicators aﬀect stock returns. We ﬁnd no support for consumer conﬁdence as a predictor of stock returns. However, managerial sentiment shows a signiﬁcant impact on aggregate market and sector return indices. Furthermore, we ﬁnd that parameter estimates for sector groupings are not consistent, implying that the sentiment-return relationship diﬀers across sectors. We also ﬁnd parameters are sensitive to industry characteristics. Importantly, the overall sentiment-return relationship is dominated by sentiment associated with manufacturing ﬁrms.