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Consumer Confidence Plunges To Lowest In 2013

Tyler Durden's picture




 

Following record UMich misses, Gallup's economic confidence collapse, the slump in the conference board's measure of confidence, and Bloomberg's index of consumer comfort signaling major concerns among rich and poor in this country (in spite of record highs in stocks), today's Consumer Confidence data from UMich continues to confirm a problem for all those 'hoping' for moar multiple expansion. Falling for the 3rd month in a row, and missing expectations for the 2nd month in a row, this is the lowest confidence print in 2013. Perhaps even more worrisome for the 'hope and change' crowd is that the 12-month economic outlook has collapsed to its lowest since Nov 2011. It would seem that all that free money flooding our 'markets' has reached peak efficacy in terms of confidence inspiration, and as Citi notes, when this cycle has played out in the past, equity market corrections are often quick to follow...

 

As we have noted previously - this move in confidence is key...

But, it's all about confidence... investors will not be willing to pay increasing multiples unless they are confident that the future streams of earnings are sustainable and forecastable... And simply put, the current levels of Consumer Sentiment need to almost double for the US equity market tp approach historical multiple valuation levels...

 

 

 

and the cycle appears to be shifting...

Via Citi,

Is consumer confidence set to turn?

Consumer Confidence is once again following a dynamic where we see it move higher for 4 years and 4 months before beginning to collapse

  • Moves higher from 1996-2000 with a smaller dip halfway through in October 1998
  • Moves higher from 2003-2007 with a smaller dip hallway through in October 2005
  • Moves higher and so far tops out in June 2013. Also sees a small dip halfway through in October 2011.

 

Higher yields do not help confidence...

 

A sharp rise in mortgage rates has a negative feedback loop to consumer confidence. For those families and individuals that were now looking/able to enter the housing market, the recent spike in rates acts as a headwind.

 

In addition to the economic backdrop, there is plenty of tail risk as we head into the end of the year. Oil prices have been rising since the summer began (and in reality since the Summer of 2012), partially due to geopolitical risks which are very much “top of mind.” A bigger spike due to a supply shock would choke the economic recovery.(In our view)

In the US, the appointment of a new Fed Chairman and the upcoming budget/debt ceiling debates are likely to bring added volatility. Tapering itself can also induce concern as the “Bernanke put” is being removed from markets.

In Europe, many of the structural problems related to the single currency union have not actually been addressed and the peripheral countries could still create turmoil going forward (see Fixed Income section focusing on Italy in particular for more on this). There has also been little concern with both the German elections and the German Court decision on the constitutionality of the OMT program. A surprise in either of these could be cause for concern.

Emerging Markets are still not out of the woods yet as growth has been weak relative to expectations and countries with current account deficits are beginning to feel pressure in their FX and Bond markets. This is an issue we believe is only starting to develop which we will continue to expand on at later dates.(We have also looked at this in our EM FX section this week)

Overall, the weak economic backdrop, poor housing recovery and potential for tail risk events over the next few months suggest that we have topped out in Consumer Confidence, a warning sign for equity markets.

 

The relationship between Consumer Confidence is clear, and IF June did mark the high and Confidence continues to decline, then we would expect to see that translate to weakness in the equity markets. The removal of the “Bernanke put” only adds to this concern.

A major turn has taken place in equity markets on average four months after Consumer Confidence turns, which would point to a decline beginning around September-October. As we have previously expressed, we remain of the bias that a correction in equity markets on the order of 20%+ is likely this year/ into 2014 and the current dynamics support such a move.

Should we see a decline of that magnitude, it is almost certain that yields would move lower in a rush to safe assets.

 

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Fri, 10/25/2013 - 10:05 | 4089860 Max Damage
Max Damage's picture

No Dip to buy on this one so BTFATH ya fuckers

Wholesale inventories rose aswell so gotta be a 500 point up day today!!!

Fri, 10/25/2013 - 10:07 | 4089870 g'kar
g'kar's picture

Hard to argue with that.

Fri, 10/25/2013 - 10:10 | 4089880 Say What Again
Say What Again's picture

... "Consumer Confidence Plunges To Lowest In 2013"

That explains why ES is UP 0.20% this morning.

Actually, the bernank is still printing funny money.  That's why ES is UP.  Nothing else matters

 

 

Fri, 10/25/2013 - 10:19 | 4089907 El Oregonian
El Oregonian's picture

That's OK, their going to get free Obama phones so they can call their loving Leader and thank him once again for the necessary pain the providers in this country must endure in order to create the lifestyle the obots have been accustomed to.

Fri, 10/25/2013 - 10:08 | 4089872 King_of_simpletons
King_of_simpletons's picture

Global recovery on the way.

Fri, 10/25/2013 - 11:18 | 4090128 SheepDog-One
SheepDog-One's picture

There will be no further dips to buy, just BTFATH's until one morning the entire thing implodes like an old Las Vegas casino.

Fri, 10/25/2013 - 12:51 | 4090445 bubblemania
bubblemania's picture

It's totally bullish news, moar QE.

Fri, 10/25/2013 - 10:09 | 4089874 101 years and c...
101 years and counting's picture

so, if all time highs in stocks doesnt make people happy, maybe we print more to get an even bigger bubble? 

Fri, 10/25/2013 - 10:10 | 4089882 Max Damage
Max Damage's picture

Are there enough trees in the world for all this paper? Maybe we should go long on trees? Laughably DeLaRue a banknote maker profit warned last week!!!!! Who the hell is running that outfit? they need sacking

Fri, 10/25/2013 - 11:49 | 4090220 annabelleballow
annabelleballow's picture

The US dollar is made from Cotton.  Tress are safe, for now. 

Fri, 10/25/2013 - 10:09 | 4089876 John Law Lives
John Law Lives's picture

All those who express a lack of confidence in TPTB will find themselves on the NSA watchlist...

FUBAR.

Fri, 10/25/2013 - 10:13 | 4089885 TheBoyPlunger
TheBoyPlunger's picture

The great thing about bubbles is they eventually pop   =)

Fri, 10/25/2013 - 10:13 | 4089892 Yoann
Yoann's picture

Buy MOAR. Fucking market, fucking FED

 

 

Fri, 10/25/2013 - 10:41 | 4089988 depression
depression's picture

Let's get this POMO train a rollin

Fri, 10/25/2013 - 10:15 | 4089893 Ness.
Ness.'s picture

Economic outlook - 12 months:

 

Jew-Lie - 104

Oct - 67

 

#winning

Fri, 10/25/2013 - 10:35 | 4089970 CH1
CH1's picture

Fuck you.

Fri, 10/25/2013 - 10:15 | 4089897 hugovanderbubble
hugovanderbubble's picture

BEARS COMING

Fri, 10/25/2013 - 10:25 | 4089905 Dr. Engali
Dr. Engali's picture

This is just a blip. The government is open again and the cap has been lifted from Zero's already maxed out credit card. Corporate and civilian welfare kings and queens of the world are celebrating.

Fri, 10/25/2013 - 10:21 | 4089915 Reaper
Reaper's picture

Confidence is hope. There's plenty of hope being pumped out.

Fri, 10/25/2013 - 10:30 | 4089954 Non Passaran
Non Passaran's picture

My consumer confidence level in PMs remains stubbornly high.  I'll be stacking!

Those charts look very promising.

Fri, 10/25/2013 - 10:47 | 4090026 depression
depression's picture

Before you start stackin you might want to overlay a chart of gold on that CC chart. PM's  don't like deflationary waves.

Fri, 10/25/2013 - 10:51 | 4090047 lewy612
lewy612's picture

The whole Obamacare fiasco (both implementation issues and pricing shock) are taking their toll on confidence IMO.

Fri, 10/25/2013 - 10:56 | 4090065 economessed
economessed's picture

Just in case UMich wants my opinion, I'll save you the phone call:  I have no confidence.  I resent being relegated to a "consumer".  And you shouldn't need a freaking survey to tell you what is obvious to everyone:  we're in a post-growth economy -- it's going to suck for a long time.

Fri, 10/25/2013 - 11:02 | 4090078 spekulatn
spekulatn's picture

This is the end, my only friend, the end.

 

http://www.thedailybell.com/news-analysis/34695/Finally-the-End-of-Keyne...

 

 

Fri, 10/25/2013 - 11:24 | 4090149 TrumpXVI
TrumpXVI's picture

Always with the gloom and doom, Moriarity.

To the MOON, Alice!

Fri, 10/25/2013 - 11:25 | 4090150 Let The Wurlitz...
Let The Wurlitzer Play's picture

This cant be happening - the FED is still monitziing debt.  There is a mistake in he numbers somewhere.

Fri, 10/25/2013 - 12:12 | 4090292 Never One Roach
Never One Roach's picture

Zero down cars, houses, food, student loans, cell phones, health care....

How can THEY not be happy?

Ungrateful Commoners.

Fri, 10/25/2013 - 12:36 | 4090384 Notarocketscientist
Notarocketscientist's picture

No problem  - Print MOAR

Fri, 10/25/2013 - 13:43 | 4090659 Cortez
Cortez's picture

The survey is set to change with a new hedonic adjustment.  The adjustment is forward anticipated consumer confidence which adjusts a percentage of those who are not confident as confident based upon the theory that they were actually confident for a majority of the time period but just not on the day the nonconfident answer was provided.

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