|
Published: August 26, 2009
So what has stocks soaring now, during this
great deleveraging -- this credit crunch -- this historic
pullback in household balance sheets?
Consumer confidence, of course.
We recently vowed to stop calling our national brethren
“consumers” in favor of less degrading words -- like Americans,
citizens or just plain-old people. Thus, we report the
Conference Board printed a surprisingly optimistic gauge of
American consumption attitudes (doesn’t that sound better?)
yesterday. After two months of decline, the index kicked back up
to 54.1, just shy of a 2009 high.
Coupled with the latest printing of the home price index, that
was enough to keep this mega-bounce alive and kicking. The news
shot the S&P 500 to a +1% gain within moments of yesterday’s
opening bell, which eventually faded into a +0.25% advance. The
index is up almost +4% in the last five trading days. The Dow
hasn’t fallen for six days in a row.
We accept that improving consumption attitudes could bump stocks
higher, especially retail. But we wonder… do consumption
attitudes lead markets, or the other way around?
|
 |
Seems like Joe Six-pack is
routinely late to the party, no? We
blew the post Lehman crash, stayed
gloomy during the best of the stock
rebound, got bullish in June when
stocks went nowhere and lost
confidence last month when the
market shot up again.
So what does a big improvement in
consumption attitudes tell us now?
If anything, that the stock rally is
about to cool off.
“Retail is a terrible business to be
in during a recession,” says Dan
Denning, belaboring an obvious idea
that seems lost on the world right
now. “Don’t forget the primary
economic and social trend right now:
People are reducing their debts.
They are cutting back, becoming more
frugal and learning to live within
their means.
“Of course, we think this is
happening. But it could be totally
wrong. Maybe the credit cards are
finding their second wind and
consumers are gearing up for one
last credit bender. But our
suspicion is that you are in the
middle of a generational/cyclical
shift in the attitudes toward debt
and that this is generally bad news
for retail stocks.”
-- Ian Mathias
Managing
Editor
AgoraFinancial.com Editor's Note: This
article originally appeared in
Daily Reckoning. |
