Friday, October 12, 2012

Consumer confidence becomes less pessimistic

According to the University of Michigan survey, consumer confidence has risen to a post-recession high—it's even higher now than it was before the last recession hit, and it was much stronger than expected (83.1 vs. 78). While it's nice to see that consumers are finally realizing that things have improved a lot since last year—when many worried that the Eurozone crisis would end up dragging the U.S. economy into another recession—I don't think the current reading is yet consistent with "optimism." In that regard, I note that confidence is still below the levels that prevailed in the 2001 recession and its 9/11 aftermath. I think the current reading is consistent with everything else I see, which is that the market is reluctantly acknowledging that the future hasn't turned out to be nearly as bad as had been feared. What we see is a lessening of pessimism, not rising optimism.

1 comment:

Dr William J McKibbin said...

For whatever reason, consumer confidence is slowly ticking upwards -- that means the window of "maximum pessimism" is also slowly closing -- for this reason, investors should not hesitate to invest into dividend and rent-earning equities in the near term -- now is the time to buy dividend and rent-earning equities on the cheap -- this window of opportunity will not last forever -- the future looks bright for investors with a 20-30 investment horizon.