Consumer Confidence Rose, Beating Market Expectations

The Conference Board’s Consumer Confidence measure beat market expectations today. The headline number of 80.7 beat the consensus guess of 77.5. Mainstream headline writers were ebullient about it. But the long term trend is far less positive. Briefing.com has a nice chart that shows that. I’ve added a couple of channel lines to illustrate.

Consumer Confidence Long Term Trend- Click to enlarge

Consumer Confidence Long Term Trend Still Declining

As a technical analyst, I’d say that Consumer Confidence may be in the late stages of a cyclical bull phase within a secular bear market. The Present conditions index is the result of a survey that asks people how things are right now. The current 4 year run in that index looks very similar to the one that occurred from 2003-2007. Only this one is worse because it started from a lower point. Americans are still more pessimistic than they were at any time from mid 2004 to late 2008.

The media can paint this however it wants. It focuses on the short run and reacts with bullish headlines. But the long term trend tells another story. It reflects people’s own situations and the situation of the US economy as a whole. The American people may be near the limit of how positive they can be about the economy. It is striking that over time the American people in the aggregate have had a far better understanding of the direction of the US economy than economists do.

Until the long term downtrend in consumer confidence is broken, the outlook for real improvement in the economic prospects of most Americans will remain bleak. However, that has absolutely nothing to do with the stock market. The only confidence that really matters for stock prices is that of the Primary Dealers who funnel Fed cash into stocks.

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