Consumer confidence apr 14

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Consumer confidence apr 14

  1. 1. Consumer Confidence Falls from 6-Year High—Dow Shrugs it Off The Fool’s Real Money stock pickers find three deals they like Commentary OTHER Not CAPScall Brian Stoffel Every month, the Conference Board surveys 5,000 American households and essentially asks them how things are going financially, and how they think things will be going six months from now. The results of these surveys give us our monthly consumer confidence index. Today, the Conference Board released results for April showing that overall consumer confidence was down to 82.3 from last month’s 83.9. While that may be disappointing to some—last month’s number was the highest in the last six years for the index—the markets seem to be shrugging it off. As you can see below, part of that may be because the index continues to trend higher, but there might be another reason for the muted reaction as well. Source: The Conference Board, Brian Gould, UW Madison There are two parts that go into the Consumer Confidence calculation. Respondents’ perception of their current economic realities account for 40% of the index, while their perceptions of how the economic situation will fare over the next six months make up the other 60%. Much like the stock market itself, expectations carry more weight than current realities. If we look at how these two metrics changed over the past month, we see that our outlook remains virtually unchanged. And remember, the outlook carries more weight—both in the index and the minds of investors—than current situations. Mar-14 Apr-14 Change Current Situation 82.5 78.3 (5.0%) Outlook 84.8 84.9 0.1% Source: Conference Board The Dow Jones Industrial Average (DJINDICIES: ^DJI) traded up by as much as 0.6% following the news, though it’s virtually impossible to know what role the consumer confidence index plays in this movement. Most notably, Nike (NYSE: NKE) and IBM (NYSE: IBM) are both up more than 1%, and both are considered bellwether companies—Nike for consumer spending, and IBM for business spending. Both could be benefitting from a strong outlook by Americans when it comes to the immediate future of the economy.
  2. 2. Also of note, Merck & Co Inc (NYSE: MRK) was trading about 3% higher today, though that likely has more to do with the fact that the company reported strong first quarter profits that exceeded analyst expectations. Investors should keep their eyes on the next consumer confidence release that’s set to come out on Tuesday, May 27th . Though strong outlooks are nice, if perceptions of the current economic situation don’t start to improve in-hand with expectations, the index could take a more noticeable drop next month. {%sfr%} Disclosure goes here.

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