Recent events (e.g., inflation, war, slowing economy) have resulted in a sharp decline in consumer expectations.
So what does this shift in expectations mean for the stock market?
Today’s chart helps answer that question by presenting seven Michigan Index of Consumer Expectations (12-month rate-of change) ranges versus the ensuing average S&P 500 12-month gain.
Conclusion…
The stock market has underperformed following rapidly declining consumer expectations (<-20% in 12 months).
What is the Michigan Consumer Sentiment Index?
The Michigan Consumer Sentiment Index tracks the results of a monthly U.S. consumer survey conducted by the University of Michigan.
How frequently is the Michigan Consumer Sentiment Index published?
The Michigan Consumer Sentiment Index is published two times each month. A preliminary report is released mid-month and a final report is released at the end of each calendar month.
Why is consumer sentiment important?
Consumer sentiment is followed closely due to the fact that consumer spending accounts for about two-thirds of the U.S. economy.
What is the Michigan Index of Consumer Expectations?
The Michigan Index of Consumer Expectations is a subset of the Michigan Index of Consumer Sentiment. It focuses on how consumers view prospects for their financial situation, the near-term economy, and the long-term economy.