Poor consumer confidence could be no friend of exchange traded funds (ETFs) for the balance of 2007. Unfortunately, there is a perfect storm of negative factors influencing the consumer right now. There is renewed market turbulence: oil prices are hovering near $100 per barrel, and winter is rearing its cold head, meaning heating your home this year will cost you.
Gas at the pump isn’t going to give any breaks, either. Banking problems as a result of the subprime mortgage crisis has credit tightening its reins and therefore, the holiday shopper may not be as jolly as in years past. Retail sales are already slow going into the season, and many believe there will be a stand-off between shopper and retailer. Who can hold out the longest?
As the U.S. dollar continues to drop to record lows against other currencies, imports are becoming ever more expensive. What will save consumer confidence? Martin Crutsinger for Associated Press reports that the RBC Cash Index fell to a reading of 64 this month, seen as a reflection of a lack of consumer faith.
There is a steepening slide in the housing market, with sales and prices dropping, and are likely to continue this drop into the months ahead because of continuing credit problems.
The saving grace could be the continued global GDP growth. Foreign ETFs are likely to continue to outperform.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.