Consumers Not Too Confident

I think a lot of the various economic reports that come out don’t really matter over the short run.  The market typically is going to go in the direction it wants and uses the economic news as an excuse for that direction.  But, there are a few that I watch because they are so correlated to the equity markets.  One that I watch is consumer confidence.  Consumer confidence came out this morning at 50.4, which was much less than expected and is now at a 16 year low. 

To refresh your memory, I’ve posted this before.  But, look at consumer confidence going back a few years at how well consumer confidence is correlated to stock prices.   The S&P 500 is in orange and consumer confidence is in white. 

Consumer Confidence Since 1998

As you can see, this is a monthly figure and it has gone down and then bounced back.  But, now it’s been in a steady decline for about a year.  The other scary thing is that it’s not showing any signs of reversing.  You can’t rely on any one thing.  But, this is just a piece of the puzzle to see where markets are going.  Combine this with weak demand for stocks and increasing supply, fear not at it’s highest level, unemployment continuing to rise (which is highly correlated to stock prices), and you have a market that’s still struggling.



1 Response to “Consumers Not Too Confident”

  1. 1 James June 25, 2008 at 8:15 am

    Are you looking to cover your shorts here? Sentiment, price, and volume don’t exactly line up yet to cover but in the past year, there has been no greater killer of short sellers than the Fed. Can you also talk about some scenarios for how the market may react to the Fed? Thanks.

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