Mike Panzner points out that the disconnect between the sentiment on Wall Street and Main Street, looking at the SPX versus Consumer Confidence Survey:

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click for larger chart

Category: Psychology, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

34 Responses to “Disconnect: Main Street-Wall Street”

  1. David Merkel says:

    A picture worth a thousand words.

  2. carrottop says:

    difference is money printed: stagflation in the horizon.

  3. carrottop says:

    difference is money printed: stagflation in the horizon.

  4. JimRino says:

    Corporate America is holding onto cash, not spending, and not innovating.
    Is this smart? If you business depends on Fraud [ Banking and Healthcare ] instead of Innovation to succeed, then you want to make and keep economic conditions “sub-optimal” till after the election.

    Consumer sentiment will improve as hiring starts.

  5. Adyt says:

    It seems from the chart there was also a disconnect at the beginning of the 90s. The SPX had rallied 40% before Consumer Confidence turned.

  6. Mannwich says:

    Wow, that really says it all, doesn’t it, BR? We ARE indeed in La-La land right now where the big corporate and Wall Street players couldn’t be doing better (well, maybe at everyone else’s expense they can and will at some point), while the rest of us slog our way through reality.

  7. DeDude says:

    Guess consumers have no confidence in Wall Street. Fool me once (2002-06) shame on you, full me twice ahh-ohh I won’t get fooled again.

  8. VennData says:

    Cuz Wall Street will always be bailed out, Main Street won’t. Wall Street really will get their taxes cut, main Street believes Obama raised their taxes. Wall Street is getting their boys back in and Main Street are the morons doing it.

    Thank the tax cut Gods for the GOP disinformation machine.

  9. Mannwich says:

    @Dedude: “Once?” We’d be in far better shape and ready to get fooled again if it were only “once”.

  10. Todd in SM says:

    Should we call that the “Fed Spread”?

  11. DC says:

    It’s a stark illustration of the Obama/Emanuel/Summers/Geithner folly. They pandered to Wall Street and gave them virtually every possible bailout with no strings attached. Typically, Wall Street has responded not with “thank you” but with “f**k you.” Still need more tax breaks, still want less regulation, blah blah blah. There’s never, ever enough.

    Meanwhile Main Street struggles with job insecurity, housing, borrowing, paying for college. Put money back in the stock market? Sure, just before the bastards drain the pool again.

    The takeaway is that Wall Street is never satisfied, so that if you indeed intend to correct bad behavior you have to drop HST’s Million Pound Shithammer. Too late now.

  12. Mannwich says:

    @Todd: LOL. I nominate yours as “TBP comment of the day”.

  13. constantnormal says:

    “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

    — Upton Sinclair, author (1878-1968)

  14. constantnormal says:

    Ah, the difference a 6-figure bonus makes … at least against unemployment, or at best, uncertain employment for as far as the eye can see …

  15. Long term says:

    i cannot help but think of the global forces when i see this chart. it is great for business profits to hire indian services and buy chinese products. to me, that explains the spread on the chart. americans will come into increasing conflict with eachother (classes, jobs, healthcare, etc) as a result of this increase in economic competition.

  16. Mannwich says:

    @Long term: “Global free trade” certainly ain’t “free” for some people. It’s been a boon for others (guess who?) though.

  17. formerlawyer says:

    The wisdom of crowds. With the “official unemployment rate” at 9% and unofficially at 17% who has confidence?

    http://www.wimp.com/unemploymentrate/

  18. Nick Abe says:

    It’s a shame you posted this. It makes no sense at all.

    What do you think this chart will look like 1,000 years from now? The S&P500 at 100,000 (or whatever) and the Consumer Confidence Index at 80 or whatever. How big is your red line going to be then?

    The physics example would be comparing speed with acceleration. Just because you’re currently travelling at 50mph and only accelerating at 0 mph doesn’t mean it’s impossible for 50mph to be your correct speed.

  19. ACS says:

    Main Street to Wall Street: http://tinyurl.com/353b8zl

  20. DeDude says:

    “It’s a stark illustration of the Obama/Emanuel/Summers/Geithner folly. They pandered to Wall Street and gave them virtually every possible bailout with no strings attached”

    I guess we can’t wait for the ink to get dry before we begin revising history. The big bailout programs were passed before any of those people got in power. The one big program that got passed after they got into power was the auto-industry bail-out and that had a lot of strings attached.

  21. rdhall3637 says:

    Simple reason for this…. Stocks, like many other asset classes, are rising thanks to underlying inflationary pressures. Real Estate, however, is not enjoying the ride thanks to the recalibration of supply and demand to more reasonable levels. Inflation hurts the poorest Americans who cannot hedge themselves at all. Therefore, we end up with this disconnect, which will continue for the foreseable future!

  22. Ducky62 says:

    The big bailout programs were passed before any of those people got in power.

    Partisan-hack much DeDude?

    A TARP-voting US Senator/de facto President-elect from IL has no power?

    What about the President of the NY Fed?

    Geithner’s position includes a large role in directing the Federal Government’s spending on the financial crisis of 2007–2010, including allocation of $350 billion of funds from the Troubled Asset Relief Program enacted during the previous administration.

    Summers had quite a career, before running Harvard, bailing out nations and appeasing/enabling Wall Street.

  23. BuffaloBill says:

    Whoa!!! The S&P 500 is an index determined by investor confidence, not consumer confidence. As investment markets and these 500 companies are increasingly global, the S&P 500 also reflects global expectations of growth from both investor and consumer sources outside the borders of the U.S. A survey of U.S. consumer confidence is far more parochial. I’m guessing that whatever correlation that may have once existed is fast giving way to the forces of international competition and investing. U.S. consumer confidence might flatline for a decade or two while our government meddles and the S&P 500 grows.

  24. louiswi says:

    Looks like the “Faux News” spread from here.

  25. PPDCUS says:

    The gap between Wall Street and Main Street above mirrors the widening disparity between the wealthiest few and the rest of America. From 2001 through 2006, this was the same gap that I observed between NINJA borrower seppuku purchase, refi and home equity loans with 20% annual property price inflation. What people were borrowing, bore no relation to their ability to service such debt loads. Result? After four years of declining values, in some markets over 60% from top ’til today, 20+% of all homeowners with loans are upside down.

    Obama’s Rubinomics 2.0 guaranteed that moral risk was only applicable to millions of little people, not the corporate interests, their lobbyists, and their paid for politicians in congress who created the incentives and gutted the regulations that enabled this debacle.

    This gap looks like the worst kind of bubble creation in the making because it’s not cyclical, it’s structural.

  26. DeDude says:

    @Ducky62;

    Talking around the facts does not change the facts.

    It was Hanky Panky Paulson that designed the “bailouts with no strings attached”. The legislators had no time to make radical redesigns during a financial crisis that got worse day by day. Both Wall Street tantrums and Presidential veto power put a gun to their heads and their only realistic choice was between financial collapse or the Bush administrations proposal. When Obama got in charge they made changes to include restriction on CEO compensation (they attached strings).

    When the new administration designed bailouts (autoindustry) they came with a lot of strings attached from the beginning.

    But that is just the facts and it is well known that the facts have a liberal bias, so don’t let them destroy your corporate media sponsored GOPster narrative.

  27. Jackrabbit says:

    The eye of the storm?

  28. ZedLoch says:

    I can’t very clearly see the data points but it looks like there was a lag after the last recession too…optimism anyone?

  29. louiswi says:

    HUH???

    “Obama’s Rubinomics 2.0″

    Could we kind of stick with the facts????

  30. louisv says:

    I have taken advantage of a lull in between writing quarterly reports to do a little research on this graph. My verdict on it is still out. I tried creating the same graph with the Michigan consumer index (he uses the Conference Board’s index) and several other consumer confidence indices but I could not reproduce similar results with the others. In fact, all other indices suggest a stronger correlation between the S&P and consumer confidence now than in the past. An other interesting thing I found when I used a couple more years worth of data is that had he extended his graph to include 1989, we would see a much greater decoupling of the two indicators only inverted, with the consumer index much higher than the S&P. Due to my age, I was not aware of the existence of markets at that time so I can not give a proper explanation for it but I found it interesting that consumer confidence could be so much higher than the S&P. Just some food for thought.

  31. Gatsby says:

    DeDude: Nice George W. reference on your first post.

    This is probably simpler than many of you are making it out to be:

    1) S&P firms get more revenue from abroad then ever before
    2) QE just prints money and give it to banks for free so it doesn’t matter if people borrow or not
    3) Said printed money given to banks creates a lot of liquidity to be spent on equities
    4) As wealth becomes increasingly concentrated the correlation between the economy and the stock market becomes weaker and weaker
    5) Your country, The United States, has become seriously fucked up.

    PS: Regan was an ass-clown, he called Wendy Gramm his favourite economist

  32. Bill W says:

    I don’t think the gap on that chart can last forever. It will tighten up, one way or the other.

  33. jabre says:

    It’s indicative of the casino that Wall Street has become.

    Complete disconnect between consumer sentiment and price? This is not much of a surprise when most individual equity assets are in the form of 401k/retirement based funds where the holdings are almost entirely unknown to the ignorant investor.

    70% of trades held less than 11 minutes. The prices are driven by hedge funds and wall street investment firms. Individuals are just dumb passengers on a shotgun ride to losing their shirts while the street gets bailed out at every crash.

  34. ben22 says:

    not much new to see here is there?

    The all-time high for consumer confidence occurred in October 1968, with a reading of 142.3. The Dow topped two months later and lost 36% over the next 18 months. Conversely, in February of 2009, consumer confidence hit an all-time low — and the DJIA bottomed days later. In April of 2009, after the stock market rally had already started, the Conference Board consumer confidence Index leaped 45% to 39.2, the second biggest jump on record. The biggest-ever increase came in April 1974, when three-quarters of the damage from the 1972-1974 bear market was still to come.