This page has been archived and commenting is disabled.

Consumer Confidence Collapses To Lowest Since Dec 2011 (Biggest Miss Since 2006)

Tyler Durden's picture




 

Whether it is the conference board, Gallup, Bloomberg, or pretty much any other measure of the economic confidence or consumer comfort in the US, the numbers have been falling (or plunging) despite the incessant rise of US equities. The reason this is of particular note, as we have discussed previously, is that this pattern of exuberant highs in stocks with fading confidence-inspiration has ominous overtones for future performance... (especially for those hoping for moar multiple expansion). The UMich data this morning merely confirms the trend with the lowest print since Dec 2011 (3 misses in a row). This is the biggest miss since Feb 2006!

 

 

 

 

Once again we remind that it's all about confidence and hope appears to be fading...

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.

 

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 11/08/2013 - 11:04 | 4135208 Randoom Thought
Randoom Thought's picture

Chill ... go outside, take a walk under the clear sky. There is probably some color left on the trees ... and clear your mind.

People are not the sum total of what the media tells them to think or believe... no matter how much the media and government try to make us fear and worry.

If the economy collapses, so what? At least we have each other.

Fri, 11/08/2013 - 11:10 | 4135237 Dr. Engali
Dr. Engali's picture

Okay Stuart.

 

http://youtu.be/-DIETlxquzY

Fri, 11/08/2013 - 11:53 | 4135380 Trimmed Hedge
Trimmed Hedge's picture

I like this Stewart better..

http://www.youtube.com/watch?v=WOKDK0g1Gno

Let's light this candle!

Fri, 11/08/2013 - 12:55 | 4135625 1stepcloser
1stepcloser's picture

I like this Stuart as well

 

http://www.youtube.com/watch?v=FVbsYFi3qP0

 

Look what I can do

Fri, 11/08/2013 - 11:08 | 4135214 Dr. Engali
Dr. Engali's picture

Taper off. Moar and moar people are confident that they don't have any money for Christmas.

Fri, 11/08/2013 - 11:11 | 4135244 aint no fortuna...
aint no fortunate son's picture

and cue Kevin Henry banging the VIX - wish Citadel was a publicly traded company - they're getting filthy rich off the Fed's illegal trading

 

Fri, 11/08/2013 - 12:54 | 4135618 asteroids
asteroids's picture

Reverse 4:1 split on VXX. The boyz will have plenty of ammo to drive the markets up now when they smash the VIX.

Fri, 11/08/2013 - 11:07 | 4135223 Evil Franklin
Evil Franklin's picture

But, I am confident.  I'm confident that in the very near future I'll have to replace my card board box.

Fri, 11/08/2013 - 11:08 | 4135228 Bobbyrib
Bobbyrib's picture

204K jobs created last month..what are these people stupid? What more do they want? /sarcasm.

Fri, 11/08/2013 - 16:24 | 4136541 Westcoastliberal
Westcoastliberal's picture

Indeed, and 720k just up and decided to exit the job market!  They must be gazillionaires!

Fri, 11/08/2013 - 11:09 | 4135234 Trimmed Hedge
Trimmed Hedge's picture

Why does Taylor hate the economy so much?

Fri, 11/08/2013 - 11:11 | 4135247 Dr. Engali
Dr. Engali's picture

I believe you meant to ask: Why does Tyler try to cut through the bullshit and get to the truth?

Fri, 11/08/2013 - 11:34 | 4135322 Trimmed Hedge
Trimmed Hedge's picture

I don't know, it just seems that despite the economic clusterfuck, that there is also a lot of good stuff out there happening every day.

Why doesn't he focus on some of that, too?

Fri, 11/08/2013 - 11:44 | 4135342 Dr. Engali
Dr. Engali's picture

It is called Zero HEDGE. Leave it to Yahoo, Market watch, Google, Faux business news, business insider , the Wallstreet journal... The list goes on and on to print the daily good news propoganda.

Fri, 11/08/2013 - 11:50 | 4135371 Trimmed Hedge
Trimmed Hedge's picture

Are you sure about that?

I'm looking at Yahoo Finance right now, and see a sample of the following negative headlines, including from AP, Reuters, Business Insider, etc.

Perhaps ZH needs to rebalance its slant for a *true* Zero Hedge..?

 

Mini space shuttle skids off runway in test flight

Health policy cancellations: New blow for admin.

Flextronics 2Q net income falls 21 percent

Darden analysis: Why Darden has the wrong culture and strategy

One Of The Housing Analysts Who's Nailed Everything Sees A Major Slowdown Ahead

Fri, 11/08/2013 - 11:13 | 4135255 aint no fortuna...
aint no fortunate son's picture

"Taylor" hates the economy because he has a functioning cortex... et tu?

Fri, 11/08/2013 - 11:10 | 4135235 LawsofPhysics
LawsofPhysics's picture

"Beating expectations" - all the way down...

people starting to believe their "lying eyes"

Go ahead, say it one more time Ben;  "there is no inflation"

roll the motherfucking guillotines...

Fri, 11/08/2013 - 11:16 | 4135239 dobermangang
dobermangang's picture

The masses must be getting their health insurance cancellations and are seeing the new higher premiums and higher deductibles.  Obamacare is the Grinch that killed the Holiday shopping season.

http://www.mediaite.com/tv/former-msnbc-hosts-health-plan-cancelled-new-...

Fri, 11/08/2013 - 11:32 | 4135315 SheepDog-One
SheepDog-One's picture

OH ok...I was wondering what caused all equities to fly wildly higher this morning. 

Fri, 11/08/2013 - 11:33 | 4135321 gaoptimize
gaoptimize's picture

The people are waking up.  The feeling of malaise is spreading, dispair is taking root and then comes anger, desperation, and finally panic.

Fri, 11/08/2013 - 11:54 | 4135381 Shizzmoney
Shizzmoney's picture

I love how Reuters said this was "unexpected".

What fucking economy is THAT writer living in?

Fri, 11/08/2013 - 11:54 | 4135383 Platinum
Platinum's picture

People will still binge shop because the sales will be even more insane than last year.

 

I look forward to seeing the videos...

Fri, 11/08/2013 - 12:12 | 4135455 Hubbs
Hubbs's picture

Lies coming from the left. Lies coming from the right. Now the MSM reporters are trying to " recant"  their storie re: Benghazi

 

http://www.nbcnews.com/id/53498378/ns/us_news-the_new_york_times/#.Un0NN...

Fri, 11/08/2013 - 12:32 | 4135527 UpAndComing
UpAndComing's picture

Blah blah...as soon as the holiday sales are announced...confidence will be magically restored. The herds will be lining up around the corner at Wally to get that 40" for $199.99 

Fri, 11/08/2013 - 12:40 | 4135561 orangegeek
orangegeek's picture

S&P500 up almost 1%.

 

So for the companies that make the product for disappearing consumers, this report is obviously bullish.

 

FAWK!!!!   HERE I PUKE AGAIN!!!!!

Fri, 11/08/2013 - 14:54 | 4136147 Hagen
Hagen's picture

Fuck you Durden!

Do NOT follow this link or you will be banned from the site!