A Strong Warning To U.S. Consumers… From U.S. Consumers

A Popular Sentiment Indicator Takes A Nosedive

Much is made of the relationship between Wall Street and Main Street, between consumers and investors.  Of course, some of us are both consumers and investors. But consumer behavior does have an impact on investment market behavior, often with a laggard effect.  Based on the latest monthly reading of the Michigan U.S. Consumer Sentiment Index, the consumer side of the relationship is suddenly unhappy.  And based on history, it is not too likely to snap out of its funk soon.  That likely works its way into the stock market, which has started 2019 as if the fourth quarter of 2018 never happened.

You see, the past three U.S. recessions were foreshadowed by a steep, sudden drop in consumer sentiment.  You can see it in the gray shaded areas above.  That is what makes the plunge in that sentiment indicator such a big deal.  Here is a shorter-term view so you can see it better.