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Consumer Confidence Jumps Most In 6 Months As "Hope" Soars

Tyler Durden's picture




 

Similar to UMich's confidence measure soaring by the most in 4 years, the Conference Board's confidence measure beat expectations and jumped the most in 6 months (though remains below the year's highs). This is the best beat in 4 months. The improvement is all based on "expectations" which soared the most in 6 months. Confidence is critical (as we noted below) especially since the massive majority of actual investors are already bullish...(and definitely not bearish)...

 

 

 

 

Of course, what is critical is the continuation of the confidence bubble...

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.

 

For now the mid-year highs are holding as confidence cannot escape its secular downturn.

 

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Tue, 12/31/2013 - 11:16 | 4288210 csmith
csmith's picture

The 2014 market model:

http://www.straitstimes.com/breaking-news/asia/story/giant-yellow-duck-explodes-taiwanagain-20131231

poof

Tue, 12/31/2013 - 11:17 | 4288215 Dealer
Dealer's picture

You can hope in one hand and shit in the other and see which one fills up the fastest.

Tue, 12/31/2013 - 11:19 | 4288230 insanelysane
insanelysane's picture

The dumbing down of America continues as more and more people lack the ability to comprehend how it all works.  Of course they believe that everything will magically be fixed in the future.

Tue, 12/31/2013 - 11:46 | 4288354 replaceme
replaceme's picture

$15 minimum wage and legalized marihoochee, what else could a fat, stupid couch potato want?  Besides Doritoes, porn, and something to get the dust off their junk?  Too soon?

Tue, 12/31/2013 - 12:07 | 4288443 Keyser
Keyser's picture

I'm from the gubbamint and I'm here to help.  

http://www.youtube.com/watch?v=j9cw9NJnOUE

Tue, 12/31/2013 - 12:23 | 4288502 Obchelli
Obchelli's picture

Amazing how ZH nailed it... Fed's s&p year end target of 1850 is within a point...

Fed has amazing control over this maarket they finished it exactly where there wanted and planned...

Doesn't look like FED is going to lose this control

Tue, 12/31/2013 - 11:17 | 4288234 TeamDepends
TeamDepends's picture

Which is why you need Hope Soap on a Rope.  Dang, why didn't we think of that before Christmas.

Tue, 12/31/2013 - 11:29 | 4288299 Colonel Klink
Colonel Klink's picture

So I'm assuming there's a noose at the other end of the soap?

Tue, 12/31/2013 - 11:57 | 4288392 VD
VD's picture

this confidence must be a direct function of prayer.

Tue, 12/31/2013 - 12:12 | 4288449 Keyser
Keyser's picture

Recent revelations in spirituality as related to Quantum physics confirms your assertion, but not for the reason you probably think. 

 

Tue, 12/31/2013 - 13:29 | 4288755 de3de8
de3de8's picture

Wait till the wheels come off the FREE S &@T TRAIN

Tue, 12/31/2013 - 13:22 | 4288733 ZH Snob
ZH Snob's picture

good luck with that confidence, suckers

Tue, 12/31/2013 - 11:17 | 4288217 Obchelli
Obchelli's picture

Why Why this BS indexes measured by some BS surveys have much higher weight than real economic numbers?

Tue, 12/31/2013 - 11:14 | 4288219 Max Damage
Max Damage's picture

So Obummer managed to give the wrong answer a few times less this month when asked the same question over and over again then

Tue, 12/31/2013 - 11:18 | 4288244 q99x2
q99x2's picture

The price of guns, ammo, gold and silver are all falling. That's enough to bring a smile to most every American.

Tue, 12/31/2013 - 11:21 | 4288257 Hedgetard55
Hedgetard55's picture

$75 billion a month, levered 10X, is still a lot of "money" to throw at stocks. Expect DOW 20k this year. Or not.

Tue, 12/31/2013 - 15:03 | 4289087 SDShack
SDShack's picture

Summer Recovery 6.0!

Tue, 12/31/2013 - 11:26 | 4288266 canstacker
canstacker's picture

Moar Hoap!

 

Tue, 12/31/2013 - 11:26 | 4288284 pods
pods's picture

Well I am hopeful for next year.  

Hopeful that when all these new taxes come due that people finally ring fence DC and won't let them out.

pods

Tue, 12/31/2013 - 11:37 | 4288328 orangegeek
orangegeek's picture

the herd is getting euphoric and the media is pumping 7/24 sunshine

 

the crash is getting closer and as always, the herd and media will be "surprised" when we "unexpectedly" tank

 

Tue, 12/31/2013 - 12:16 | 4288463 SheepDog-One
SheepDog-One's picture

Of course it will all be very shocking, we'll have stories from poleaxed 'expert eclownomists' and various 'analcysts' baffled about how they didn't see this coming and no one could have. 

Tue, 12/31/2013 - 12:00 | 4288391 roadhazard
roadhazard's picture

Consumer confidence is decided by when the SS and unemployment checks arrive. Otherwise that is the most worthless stat of all.

Tue, 12/31/2013 - 12:01 | 4288410 MedicalQuack
MedicalQuack's picture

All I can say here is "Quantitated Justification" at work to fool ourselves once again:)  As Mike Osinski says in the video here (he's the guy who wrote the sub prime software that the banks used and and abused and remodeled) "you can fix anything with software but the model doesn't always work in the real world and you end up with some virtual fantasies"...

http://ducknetweb.blogspot.com/2013/12/quantitated-justification-for-bel...

I see this as an outdated index with goofy methodologies used and just one more way to "fool ourselves" and keep the "confidence bubble" going...and the link above has a video that talks about the "journalist bot"...one like Forbes is trying to sell as some of their news articles are written by bots and not humans.  They are schmoozing up folks like Fox and others to purchase them...pretty amazing stuff when a bot can be programmed to go out and do it's machine learning thing, take the parameters of the template you load, read other material, change the wording to avoid plagiarism and "bingo" you have a slew of news to read. 

I don't know what the Wall Street Journal is doing but they are talking about how their news formats will be changing.  I read a blog post the other day with a guy complaining about the content of one of their articles being bland and not really news worthy..so who knows maybe bots are over there too.  Kind of creepy as this stands to really control more of the content that gets out there, especially having a bot interview a data base...oh wait until you see the numbers and opinions the bot creates!  Again it will "machine learn" methodologies that are out there now and base the news articles on such patterns.  We have had a lot of junk in the mix so where it goes from here...well who knows...not looking forward to a future of "bot news" by any means..and who knows maybe the bot could do a better job with consumer confidence indexes...this one sure is one out of fantasy land to where the model doesn't play out in the real world at all. 

Tue, 12/31/2013 - 12:25 | 4288520 PrecipiceWatching
PrecipiceWatching's picture

Why should I care about any PropagandaPoll among a populace who would twice elect an historically unprecedented far left radical, an unapologetic, anti-American (yeah I know that patriotism is uncool among the "hip" Libertarians that dominate this site) RaceMarxist.

 

HopeyChangyFaggyGetWhitey

Tue, 12/31/2013 - 15:12 | 4289111 SDShack
SDShack's picture

I've said from 2008 till now, and will keep repeating it until 0zer0 is gone...

Hope & Change was nothing but Hoax & Chains.

Sadly, the sheeple still bleat for more. It's Mob rule... a combination of The Big Mob (gangster/business/govt) and The Sheeple Mob (FSA).

Tue, 12/31/2013 - 12:31 | 4288543 Chuck Walla
Chuck Walla's picture

I have hope sores.

FORWARD NEW YEAR SOVIET!

Tue, 12/31/2013 - 14:14 | 4288915 Anglo Hondo
Anglo Hondo's picture

Good to hear the "Hope" is up.

How is the "Change" thing working for you?   Yeah, things have certainly changed.

 

Tue, 12/31/2013 - 15:55 | 4289247 christiangustafson
christiangustafson's picture

Hmm, this chucklehead managed to get the FOMC low call and the 1848 high (for now):

http://deflationland.blogspot.com/2013/12/charts-12-17-full-moon-tonight...

Now Mr. Market needs to give us a nice topping daily candle on the SPX into the New Moon and New Year.

Good luck to all bears ... 2014 should be loads of fun.

Wed, 01/01/2014 - 00:00 | 4290305 BigSpruce
BigSpruce's picture

Ahh yes Hope - the last refuge for the poor huddled masses faced with imminent destruction. Sure - hope will really fill the rumbling belly and keep the lashing rains off your poor tired body. Is this what we, as a society have come to?

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