With consumer confidence dragging along the sea floor it is critical that we understand the ramifications. Does crappy confidence lead to crappy equity returns? Ken Fisher conducted some research back in 2002:
Financial advisors who worked to restrain exuberant investors in the late 1990s, worked equally hard to lift desperate investors in the early 2000s. Will lower stock prices sap the confidence of consumers? Will lower consumer confidence extinguish all hope for investors?
We study the consumer confidence measures of the Conference Board and the University of Michigan and the investor sentiment measures of the American Association of Individual Investors and Investor’s Intelligence. We find that consumers grow confident when investors grow bullish. Consumer confidence declines when stock prices decline but investors need not fear that declines in consumer confidence would be followed by low stocks returns. Low consumer confidence is followed by high stock returns more often than it is followed by low stock returns.
By using this site you agree to the 'Terms of Use'. This is not advice. This site features the opinions of the various authors and sources. While Plan B Economics makes every effort to provide high quality information, the information is not guaranteed to be accurate and should not be relied on. Investing involves risk and you could lose all your money. Consult a professional advisor before making any investing decisions.
