Economic, Business Confidence Starts To Roll Over

One week after Gallup measured US economic confidence at the highest level on record, just days after Trump gave his now long-forgotten "conciliatory" address to Congress, the mood appears to be souring somewhat not only for regular Americans but also small businesses.  In Gallup's latest weekly economic confidence reading, it found that Americans' confidence in the economy returned to its recent levels last week after a record-setting post-recession high the week before. Gallup's U.S. Economic Confidence Index was +9 for the week ending March 12. This is down from +16 the previous week, and in line with weekly scores recorded throughout February.

In the latest weekly survey, 48% of Americans say the economy is getting better, and 45% say it is getting worse. That compares with 54% and 39%, respectively, the prior week. As a result, the economic outlook component of Gallup's index fell to +3 from +15. Meanwhile, Americans' assessments of current economic conditions were largely unchanged. For the week ending March 12, 34% of Americans rated the economy as "excellent" or "good," and 20% rated it as "poor," resulting in a +14 current conditions score, roughly where it has been since late January.

Still, it is too early to say the disappointment phase has set in: since late November, Americans have expressed higher confidence in the U.S. economy than they have during any period since Gallup began tracking the index in 2008. Or rather, confidence among one supporters of one specific party: while economic confidence among Republicans has remained steadily high for the past three weeks, the fluctuation in the latest national figure resulted from movement among Democrats and independents, whose confidence returned this past week to previous lower levels.

In summary: Americans' current level of economic confidence is about where it was before the stock market rally and Trump's address to Congress,  and it is well above the mostly negative scores Gallup recorded from 2008 to late 2016, which is odd considering the polls reported elsewhere which gush in praise of the Obama regime yet find Trump has the lowest early approval rating of any president. Still, consumer confidence may have subsided last week after a slight decline in the Dow Jones industrial average after its massive gains in February, and may see further declines as Trump sees increasingly greater roadblocks in Congress for both the Obamacare repeal process and his tax reform plan.

It was not just Gallup: after soaring in January to just shy of all time highs, NFIB small business confidence missed expectations of a further rise, and instead posted a modest decline in February.

However one group continues to gush with optimism: CEOs.

According to the latest Business Roundtable CEO Economic Outlook, leaders of the largest U.S. companies are becoming increasingly optimistic about sales growth, hiring and capital investment, causing a measure of chief-executive sentiment to increase by the most in seven years. The headline Index rose 19.1 points in the first quarter from the fourth quarter, to reach 93.3, according to a survey released Tuesday. It was the largest one-quarter gain for the index since the fourth quarter of 2009, when the economy was just emerging from the recession. Readings above 50 indicate economic expansion.

“I am enthusiastic about the opportunity to enact a meaningful pro-growth agenda that will benefit all Americans,” said J.P. Morgan Chase CEO Jamie Dimon, chairman of Business Roundtable. “Business confidence and optimism have increased dramatically.”

Then again, those of a cynical bent may ask if this is just another case of CEOs speaking out of a corner of their mouth, while doing something else, because as we reported last week, in January corporate insiders and other executives bought their own stock at the slowest pace in at least 29 years. According to the Washington Service, there were a total of 279 insider buyers in January, the lowest since 1988.  Moreover, the number of executives selling their stock has also grown in recent months, pushing the ratio of buyers to sellers in February to its lowest since 1988 as well.

Insider Buys

While it is too early to call the end of Trumpforia, should the market finally selloff, as Bank of America warned earlier could happen as soon as tomorrow if the Fed kills the "Buy The Dip trade", then reflexively confidence will follow right behind, resulting in a feedback loop, and chase to the bottom. One thing that is certain however, is that the insider selling will only accelerate.