Why the spike in consumer confidence may not be a good thing
The recent spike in consumer confidence should worry you, at least that’s what Mark Hulbert wrote in his article “Yet another reason to be scared” for MarketWatch.
Hulbert’s basic reasoning is that history has shown the stock market tends to do better following large drops in consumer confidence, not large jumps.
“I know it strikes many as counterintuitive to worry about a big jump in consumer confidence,” Hulbert wrote on Wednesday. “But that’s what I am doing after analyzing the Conference Board’s Consumer Confidence Index over the last three decades.”
In his research, Hulbert correlated each month’s change in the confidence index with the stock market’s subsequent performance. He found that the biggest jumps on the CCI were generally followed by lackluster returns, while a decline in the index often signaled above-average returns.
The highest level of consumer confidence in the past 25 years according to the CCI, Hubert points out, was early in the year 2000.
“That’s right,” he wrote, “just before the Internet bubble burst.”
The moral of the story, according to Hubert, is not to get carried away by the deceptively positive news that consumer confidence is at its highest level in five years.
- 50 highest paying jobs in Utah
- 7 ways to help your loved one when they've...
- Balancing act: Different kinds of guilt...
- Why we don't need to worry that Utah cities...
- Low unemployment rates contribute to dropping...
- Is preschool worth the money?
- Consumer confidence continues to climb in Utah
- 10 closing costs you may not expect —...
- Marijuana could deliver more than $800... 13
- 7 reasons why millennials are... 13
- Low unemployment rates contribute to... 7
- 4 things you don't want your boss to know 6
- Overdraft and ATM fees higher than ever 4
- Microsoft skips Windows 9 to emphasize... 4
- How to be a billionaire 4
- Is preschool worth the money? 4