The University of Michigan’s August consumer confidence readings do not bode well for Trump or the stock market.
Confidence in the government’s economic policy fell to the lowest level since early 2017. The index had climbed to its highest level since 2002.
The chart below depicts that the consumer sentiment reading of 72.8 held at just above the April 2020, 71.8 reading which was the lowest since 2012. The metric had rallied to 78.1 in June. Due to the low probability for a new stimulus package being passed in August the reading is likely to reach a new low in September.
The chart below contains the Dow Jones composite index versus the consumer confidence index readings from September of 2007 through September of 2009. Encompassed in the period is the December 2007 to June 2009, Great Recession.
The chart above depicts that the confidence index declined from 85.7 in September 2007 to 77.5 in December 2007 which is when the recession officially began. The index’s low reading for the period was 57.7. It occurred in December 2008, which was 15 months after sentiment began to decline and three months before the Dow bottomed. Consumer confidence was a leading indicator for both the Dow’s decline and also its recovery. Until the index bottoms and upturns the economy and the stock market will remain at risk.
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