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Consumer Confidence Surges Most In Over 4 Years With Conditions At 6-Year Highs

Tyler Durden's picture





 

With both current conditions and future expectations indices jumping higher, the UMich consumer confidence headline final print rose at its equal fastest pace since Sept 2009. The surge in current conditions - the largest since Dec 2008 - has lifted it back to the highest level since July 2007. If there was anything to note that took the shine off such an exuberant surge it's the fact that the headline number did actually miss expectations (3rd miss of last 4) and the final outlook data dropped from the preliminary print. As we have noted before, it is confidence that 'inspires' the multiple-expanding hope as fundamental reality fades - bulls better hope it's different this time as we hit the year's highs in confidence.

Current conditions spiked as much as theu did off the post-Lehman collapse...

 

and while the index overall is back at multi-year highs, we have missed 3 of the last 4 months...

 

As a gentle reminder, 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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Mon, 12/23/2013 - 11:14 | Link to Comment Max Damage
Max Damage's picture

Who the fuck are they asking? Rich fuckers, or dumb fuckers with falling wages? Normal people would not be answering all is great!!!

Mon, 12/23/2013 - 11:20 | Link to Comment PR Guy
PR Guy's picture

 

 

While you are waiting for the lies to stop, here's a funny animation to watch:

 

http://www.youtube.com/watch?v=39X4sXc0Ubc

 

Mon, 12/23/2013 - 11:26 | Link to Comment Popo
Popo's picture

When consumer confidence can bascially transition from peak-to-trough in under 12 months... who really cares about consumer confidence?    It's a highly volatile indicator.   If you can be on top of the world now, and at the gates of hell this Fall... do we really care what the number is?

Mon, 12/23/2013 - 11:31 | Link to Comment NoDebt
NoDebt's picture

I wonder what the confidence level of sheep is the day before they're taken to slaughter?

Probably means about as much.

 

Mon, 12/23/2013 - 11:35 | Link to Comment Uchtdorf
Uchtdorf's picture

Excellent analogy. You'll have to stop being logical like that if you want to survive in this Brave New world.

Here's a headline from an article earlier today on ZH:

US Savings Rate Slides As Personal Incomes Below Expectations; Real Disposable Income Growth Tumbles

Y'all realize both of these things can't co-exist.

Mon, 12/23/2013 - 11:40 | Link to Comment Obchelli
Obchelli's picture

How come Thanksgiving shpping missing big, Christmass shopping about to miss... Last two first time unemployment prints... Caterpillar 13% drop in sales. China Credit crunch and all this "surveys" and GDP show numbers skyrocketing to positive... Who is lying here REAL Economic numbers or "Survey"? And Why does some BS "Survey" has more effect than real economic number?

Mon, 12/23/2013 - 12:34 | Link to Comment nickels
nickels's picture

In other news, Ravens' confidence was high at the beginning of the Patriots game-----

Mon, 12/23/2013 - 11:40 | Link to Comment Headbanger
Headbanger's picture

They're asking people who are spoofing the crap out of stupid polls like this for laughs.

Either that or everybody is in such a state of denial of their lousy situation now cause of all the bullshit propaganda from the Fed and the media.

 

Mon, 12/23/2013 - 11:25 | Link to Comment papaswamp
papaswamp's picture

People tend to be a bit upbeat during the holidays ( maybe it's the spiked punch bowl). The interesting thing are the trend lines and ever decreasing cycle. This suggests the next down swing is extremely close.

Mon, 12/23/2013 - 11:29 | Link to Comment breakyoself
breakyoself's picture

Then the credit card bill arrives...

Mon, 12/23/2013 - 11:31 | Link to Comment Cortez
Cortez's picture

They randomly ask people entering office buildings wearing business attire.

Mon, 12/23/2013 - 12:17 | Link to Comment Richard Chesler
Richard Chesler's picture

Actually, they're limited 85 Broad.

Mon, 12/23/2013 - 14:26 | Link to Comment Cortez
Cortez's picture

That is only true during the election season.  Can't play the trump card every time.

Mon, 12/23/2013 - 11:36 | Link to Comment JPMorgan
JPMorgan's picture

The new normal is abnormal.

Mon, 12/23/2013 - 12:30 | Link to Comment Thing1Thing2
Thing1Thing2's picture

Normal people would not give a f*ck enough to voluntary partcipate in bullsh?t surveys.

Mon, 12/23/2013 - 11:15 | Link to Comment PR Guy
PR Guy's picture

 

 

While you are waiting for the lies to stop, here's a funny animation to watch:

 

http://www.youtube.com/watch?v=39X4sXc0Ubc

Mon, 12/23/2013 - 11:22 | Link to Comment 101 years and c...
101 years and counting's picture

prior to the depression's onslaught in 2007/2008, a print below 90 was recessionary.  oh wait, still is. 

Mon, 12/23/2013 - 11:33 | Link to Comment NoDebt
NoDebt's picture

Thank you for that.  I've been pointing that out since I first came to ZH.

Mon, 12/23/2013 - 14:11 | Link to Comment SDShack
SDShack's picture

+100 for your comment. Right out of the BLS (Bureau of Lies & Statistics Playbook). Well done sir.

Mon, 12/23/2013 - 11:22 | Link to Comment Zaphod Beeblebrox
Zaphod Beeblebrox's picture

I'm sure consumers feel confident now that they are all wearing the new Air Jordan 11 Retro Gamma Blues.

Mon, 12/23/2013 - 11:25 | Link to Comment ChaosEquilibrium
ChaosEquilibrium's picture

UMICH-CC is a 'polluted statistic' and CANNOT be trusted going forward.......happened about a year ago when it began to roll over!  Miraculous Miracles will begin to sprout up everywhere in ECOSTAT Land!

Mon, 12/23/2013 - 11:29 | Link to Comment GeezerGeek
GeezerGeek's picture

Maybe people are happy because Obama left DC and went to Hawaii?

Mon, 12/23/2013 - 11:36 | Link to Comment Ms. Erable
Ms. Erable's picture

Seems like the ones toking the most hopium are trying to blow their smoke up everyone else's asses.

Mon, 12/23/2013 - 11:34 | Link to Comment skipjack
skipjack's picture

Clearly people are confident that Obummer(non)care will save the world !

Mon, 12/23/2013 - 11:42 | Link to Comment Colonel Klink
Colonel Klink's picture

In this eCONomy, you can't spell CONfidence without CON!

Mon, 12/23/2013 - 11:43 | Link to Comment tradewithdave
tradewithdave's picture

Define "confidence man"... uh, I mean... define "confidence" man.  Never mind that... let's try it again.  The origin of the word "con", okay it means "before" to come before.  Okay, fide, what does that mean.  Okay, faith.  So confide... before faith.  Okay, then faith before what... ence?  Well "ence" is an action, a condition, a quality or a state.  So the definition of onfidence... "faith before a certain condition."  Alrighthy then... answer the following question with certainty and you've got it; what condition our condition is in?  Then you've go it. 

Everybody sing along together with The First Edition: http://www.youtube.com/watch?v=Gfa6umSlR8A

Mon, 12/23/2013 - 11:43 | Link to Comment andrewp111
andrewp111's picture

This is really a discussion about how long before the current bull run turns into the opposite direction. That is what everyone really wants to know, and no one has any answers.

Mon, 12/23/2013 - 11:47 | Link to Comment insanelysane
insanelysane's picture

They aren't asking anyone.  The number is completely made up.  See Bernie Madoff.

Mon, 12/23/2013 - 12:07 | Link to Comment dogfish
dogfish's picture

The Christmas EBT cards have been sent out everybody is rich.

Mon, 12/23/2013 - 12:11 | Link to Comment MFLTucson
MFLTucson's picture

More bullshit.

Mon, 12/23/2013 - 12:40 | Link to Comment the not so migh...
the not so mighty maximiza's picture

Unusually unusual

Mon, 12/23/2013 - 12:55 | Link to Comment mvsjcl
mvsjcl's picture

What fucking bullshit.

Mon, 12/23/2013 - 13:29 | Link to Comment The Wisp
The Wisp's picture

No Bad News Allowed Before Christmas, or Elections.. you Know the Rules...

Mon, 12/23/2013 - 15:39 | Link to Comment SweetDoug
SweetDoug's picture

'

'

'

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Who the hell are they polling?

 

Not anyone I know.

 

•J•
V-V

Mon, 12/23/2013 - 17:28 | Link to Comment monad
monad's picture

Can anyone tell me why the world is jam packed full of idiots?

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