GLOBAL ECONOMICS AND POLITICS

Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.

 

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CONSUMER CONFIDENCE AND US STOCKS © Leo Haviland, September 6, 2011

The level and trend of the Conference Board’s Consumer Confidence Index alongside this nosedive in the S+P 500 indicates that the US economy and the S+P 500 probably will slump further over the next several months. If so, then the worldwide economy will slow alongside America’s, as will many other equity arenas. Given the close links between the S+P 500 and overall commodity marketplace trends in recent years, commodity players should monitor the Consumer Confidence Index.

After the first quarter of 2009, both the S+P 500 and the Conference Board’s Consumer Confidence Index (“CCI”) rose sharply. The S+P 500’s race to its 5/2/11 peak at 1371 more than doubled its 3/6/09 low at 667. At this 5/2/11 altitude, it was about 87 percent of its 10/11/07 major high, and just 4.8pc beneath its final pre-crisis top at 1440 on 5/19/08.

The CCI’s February 2011 high at 72.0 indeed represents a steep ascent from its February 2009 25.3 valley. Yet it nevertheless fell well short of the 111.9 July 2007 top. Moreover, this winter 2011 CCI elevation was only modestly above the 61.4 level of March 2003- when the S+P 500 achieved a major low at 789 (3/12/03) miles underneath 2011’s various S+P 500 heights. In addition, since February 2011- when the S+P 500 made an initial top at 1344 on 2/18/11, the CCI has ebbed lower. It fell under 60 in June (57.6) and July (59.2) and tumbled to 44.5 in August.

However, given the sharp fall in the S+P 500 from its February, May, and July 2011 highs (8/9/11 low at 1101 is almost a twenty percent drop from 1371; 9/2/11 close about 1173), the S+P 500 and CCI now are confirming each other in a bearish path.

Note the S+P 500 plateau on 3/24/00 at 1553 was not far from the October 2007 summit (Dow Jones Industrial Average high 1/14/00 around 11,910). In contrast, the February 2011 Confidence Index level lurks far beneath (only 50 percent of) the 144.7 achieved in January 2000. This underscores the current weakness of consumer net worth and the related mournful consumer attitude.

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Consumer Confidence and US Stocks (9-6-11)