What Happens When Consumer Confidence Falls 10-Points?
By Barry Ritholtz - February 24th, 2010, 11:36AM
Consumer Confidence fell 10 points last month.
That is a relatively rare event, occurring only 21 times in the 400 months or so the survey began its monthly format in 1977.
James Bianco notes that “Almost every such 10-point drop can be attributed to an unusual market-moving event.”
Stock market performance following these drops are usually poor:
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chart via Bianco Research
Stock market performance following these drops are usually poor:
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Bianco adds: “This is not meant to imply a cause and effect relationship, but is certainly something worth watching over the following months…”
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February 24th, 2010 at 11:37 am
the reappointment of Bernanke!
February 24th, 2010 at 11:43 am
Well…there is supposed to be a big blizzard in the NE the next few days. Maybe that’s the correlation.
It’s hard to imagine it could be our economic problems causing that 10 pt. drop…. (sarcasm)
Seriously, the weather has been so lousy for so long all over the US this Winter that it could be that folks are worn out and tired of it all– along with our mounting economic woes. We had our first sunny above 40 degree days and I headed to the Mall. Had salespeople in two big Dept Stores comment about how good it was to see people out at the mall and shopping. On salesperson said: “It’s good to see smiling faces.”
February 24th, 2010 at 11:46 am
Um, the S&P moves 1.31% on many days…. The conclusion seems completely unrelated to the average, let alone to any individual snapshot.
February 24th, 2010 at 11:50 am
If it were to happen in any other major industrialized nation the currency would depreciate. Here…the currency rallies. Make no mistake about this, the USD may be the last currency to fall but eventually it will circle the toilet bowl too.
February 24th, 2010 at 11:52 am
Just in time for the second “Green Shoots” campaign.
February 24th, 2010 at 11:55 am
near zero r-squared, useless predictive power…. now fading Luskin, that’s got r-squared.
February 24th, 2010 at 11:57 am
Hmm… this is definately 1 to watch.
That said… it looks like this is a bouncy number with 2 other 6-7 pt drops in the last 9 months. He also ignores the Aug 2004 drop of 13 pts (3 mons), Feb 2004 drop of 9.2 pts (similar stage in recovery). And its even more bouncy in the 1992-93 recovery period.
February 24th, 2010 at 11:58 am
Well we just had a huge drop in New Home Sales and there’s this year’s version of the short ban. Something wicked this way comes….
February 24th, 2010 at 12:10 pm
Another question: What happened in history when new homes sales dipped below the low of a recession after the recession had already ended?
rc
February 24th, 2010 at 12:32 pm
[...] happens to the stock market after consumer confidence tanks. (Big Picture, [...]
February 24th, 2010 at 12:44 pm
1.3%? Another coorelation to watch for; the sun usually comes out on days following a 10% drop
February 24th, 2010 at 1:06 pm
Hmm…confidence surveys should reflect something of the broader economy, even the culture. So, in some respect, should stock market indices. Should we surprised that they would have a positive correlation? In a sense, they are measuring the same things. It would be surprising if, accounting for time lags (stock market indices are nearly real-time indicators, whereas consumer surveys are dispositively not) they didn’t track fairly closely.
February 24th, 2010 at 1:08 pm
fwiw, new homes are typically a one up from a starter home, thus, people are not moving on up, you have less hires, so less families moving to a new city just buying a new home cause it is easy
add in new homes typically on the outskires, add in drive time and gasoline, and they are less attractive for a commute, plus, it puts u at a disadvantage in a large city for where you work
February 24th, 2010 at 1:23 pm
The only two things that have changed over the last 3 weeks, when confidence went from a 1 year high to a 1 yr low, are:
1. Media chatter about government paralysis and jobs never coming back…ever.
2. Horrible weather from coast to coast. Someone on CNBC said that the home sales numbers were down because of the bad weather in the East, but that doesn’t explain poor sales in the West. Um…we had weather too, hon. Instead of mountains of snow, we had buckets of rain and rivers of mud.
February 24th, 2010 at 1:40 pm
The economy has been slowly gutted over the course of the last 30 years.
Each recession has required more and more of a BS recovery to mask the damage being done by Free Trade et al.
The last mirage is fading from the eyes of joe six pack, ZIRP, Unemployment Insurance, house purchase credits, TARP, and his boat is still going down at the bow.
GS, JPM, the “400 richest families” took all the lifeboats and emptied the ships safe on the way out.
Poor Joe is locked up down in steerage!
February 24th, 2010 at 1:43 pm
Are people’s unemployment benefits starting to run out? How about year end bonuses that people were once dependent on for survival? Have those been cut off? Or maybe the government has been gaming confidence numbers higher and they finally had to get back to reality
February 24th, 2010 at 2:09 pm
“Whether the weather, whatever the weather, whether you like it or not”.
February 24th, 2010 at 2:22 pm
I guess Greece / Europe is last months news now. BR is whining about a little snow now more than Debt problems. j/k
February 24th, 2010 at 2:28 pm
@Common: My understanding is that unemployment bene’s are due to run out for millions of people in the coming 1-3 months, but they will be extended by Congress. I think that’s a done deal, so that can’t be it. Maybe people who’ve been on extended unemployment are starting to realize this is going to be as good as it gets for them for quite a while.
February 24th, 2010 at 2:33 pm
My confidence in anything happening by government or business that is in my favor is already at ZERO. It cannot go lower.
The only thing I can say with confidence is that anything that helps me financially will be of my own doing.
February 24th, 2010 at 2:45 pm
@Mannwich
Any explanation that tries to pin the drop on long term developments like persistent unemployment is fundamentally unsound. Are we supposed to believe that, four years after the beginning of the housing crisis, people suddenly woke up on Feb 1 and realized that housing sucks? Are we supposed to believe that, two years after the financial meltdown began, people suddenly woke up on Feb 1 and realized that the economy sucks? Are we supposed to believe that, one year after job losses peaked, people suddenly woke up on Feb 1 and realized that finding a job sucks?
@ashphelham
Are we supposed to believe that people like you woke up three weeks ago and changed their political ideology from liberal to conservative?
February 24th, 2010 at 3:10 pm
@f411: I have no idea why people believe what they believe. Just throwing it out there for some thought, and realize that it’s a multi-factored, complicated thing, but your attributing the sour mood to “bad weather” is just as flawed (if not more so), IMO.
February 24th, 2010 at 3:13 pm
@f411: By the way, job losses may not have “peaked”, as you say. January had the most mass layoffs since July of last year. Me-thinks that layoffs may be gaining steam again. We are flatlining. This will probably be as good as it gets for a long, long time.
I’ve also had recent frank conversations with people I had never suspected would be as pessimistic as I had been all this time, but it appears that many are coming around to the fact that we are in deep, deep trouble as a nation. I think this is slowly hitting home for a lot of people. Was in NYC recently on a trip and I was very surprised by some of these conversations, and many of them were not started by me. I was there to have fun and not think about any of this crap.
February 24th, 2010 at 3:31 pm
@f411: Like I said, the new “normal” is upon us. The Flatline Bagholder Grifter Economy. Catch the fever. What’s going to ultimately lead us out of this? In the past, it’s always been housing. Not this time. What will it be then?
http://www.calculatedriskblog.com/2010/02/housing-best-leading-indicator-for.html
February 24th, 2010 at 3:40 pm
The weather has NOT been all that bad in CA – jesus Franklin, how long have you lived here? A few mudslides in a burn area is hardly enough to be of any relevance. Were you not here in 2005? 1997? THAT was bad weather – you appear to be grasping at straws to support your preconceived opinons (once again)
February 24th, 2010 at 3:42 pm
@Thor: f411 should come to Minny, where the weather is bad 8 months a year. You people out on the Left Coast are soft. ;-)
February 24th, 2010 at 3:46 pm
Manny I know , I don’t know how you Popsicle people do it :P
I can see a case for blaming the bad January housing numbers for the East Coast on Weather, but really now, I’ve lived in CA my entire life, we’ve had more rain than normal so far this year, but this has not been, by any stretch of imagination, a bad winter.
February 24th, 2010 at 4:40 pm
[...] every such ten-point drop can be attributed to an unusual market-moving event,” Jim Bianco says. “This is not meant to imply a cause and effect relationship, but is certainly something [...]
February 24th, 2010 at 5:52 pm
I’m wondering the same thing as HarryWanger @ 11:58 am
“Well we just had a huge drop in New Home Sales and there’s this year’s version of the short ban. Something wicked this way comes….”
The headlines of the new ban on short sales caught my attention. We live in a rigged game now. The Fed/big bank cabal has managed to get whatever law, rule or policy they need. Are those now leading indicators? Food for thought.
February 24th, 2010 at 6:56 pm
BTW…from Charts Barry Posted and Conclusion at the end…it was hard to predict anything from those charts as to how the market would go…one way or the other.
But, if one looks at “Investor Sentiment”….it’s not been a good year Weather Wise all across America from Fires/Floods/Storms/ ….and disruptions in folks basic day-to-day lives from all of this.
If you can’t get to the Mall…you can’t shop/buy…stores suffer. If your street doesn’t get plowed because your State is having Financial Problems and they focus on “Business First”…it means you can walk to work (if you can’t plow your driveway..but if Public Transit isn’t an option…you gotta get the major roads plowed before you can get to your place of employment.
It all becomes an “Interlinked Network” of how America deals with Weather or other Disruptions…as to how we get paid for our work…how our kids get educated (Snow Days ..made up with time for Vacation to Disney World are condensed into a smaller Time Frame…and if your roof leaked or caved you’ve gotta either get Insurance or do your OWN repairs…(should be good business for Lowe’s and Home Depot…plus contractors) and then there’s the lack of traffic to restaurants from the High End to the Chick-Fil-A …if you can’t get out to eat or do the take out…and the Theaters and Arts & Entertainment from Sports to whatever fills our local venues from Travelling Broadway Shows to Community Theather.
So much depends on WEATHER it’s amazing how Wall St. has discounted this and seems to have it’s OWN MOMENTUM that is disconnected from Ordinary Americans Lives and the Cycles of the Human Condition.
It’s amazing to watch it all play out.
February 24th, 2010 at 7:12 pm
Construction job losses were big in January numbers, construction has a long lag due too fact most commercial construction jobs average 2 years. CRE is tagged directly too interest rates, and who will borrow. On average it’s pretty basic Govt. 25%, Industrial 25%, Office/Wrhouse/Retail 25%, Hospitals/Medical Space 25%…………..Now someone please tell me which entity is taking on bonds too build????????
You’re state and muni’s are tapped out, industry is very specific, yet, basically overall demand is low and no new mgf are up on the blocks, office reail, yeah, right………hospitals…….they are on hold for large expansions
As some like too say, pushing on a string.
February 24th, 2010 at 8:54 pm
Confidence was picking up a bit till Obama decided he wanted another jobs/stimulus bill. The $3 Trillion plus budget was a shocker to many that realize as Marc Faber continues to say, were all doomed. 2 plus million folks will be losing their unemployment benefits before April unless they get another bailout. Some have been collecting a check for 99 weeks.
Benanke must be smoking some strong shit. He said that folks have more money to spend. WTF doesn’t he understand that there are about 17 to 20 million americans either without work or working a shortened week. Where the hell are they getting that extra spending cash he talked about?
And yes, another snow storm is heading my way, or here in Pa. I’ll be home to shovel when it hits. Still on my three day work week and hoping it doesn’t get any worse.
But don’t fret, Bernanke cheered everyone up today. The market was up about 90 points. As usual the banks continue to lead the rally higher.
Meanwhile the Canadian hockey team is kicking the shit out of the Russians.
Lets all start singing, Happy days are hear again. LOL
February 24th, 2010 at 9:48 pm
To foxmuldar. Bernanke doesn’t need to smoke anything. Like most lifelong academics/government workers, he does not have the slightest idea of how the bulk of Americans live. Reminds me of the time some poor lady told George W once at some town hall meeting that she had to work three jobs.
Bush responded, ” Fantastic, uniquely American, isn’t it?” Or that rich guy that got thrown out of the early Presidential running when he was asked if he wanted a Whopper from Burger King, and he replied,
“what’s a Whopper?” We are on our own out here, for sure.
February 26th, 2010 at 1:57 pm
Barry,
I took the Bianco research on Consumer Confidence drops of 10% or more and looked a bit further ahead than they did:
http://www.tradersnarrative.com/when-consumer-confidence-drops-the-sp-500-rises-3681.html
as you’d expect, it is a contrarian indicator with a “sweet spot” somewhere between 3-6 months
feel free to share or mention it if you think it is interesting
Cheers