Not So Great Expectations

Published on: 09/13/2022

In this edition of Chart Talk, Tony Ogorek and Jeff Viksjo discuss how the confidence that consumers have in the economy may affect the future for financial markets.

 

TRANSCRIPT

 

TONY:

Welcome to another edition of Chart Talk.  I’m Tony Ogorek.  I am here with Portfolio Manager, Jeff Viksjo.  And Jeff, today we’re going to talk about the power of confidence.  And what a lack of confidence could mean for the future of financial markets, as well as the economy.  Let’s start off with this first chart from the Conference Board, which is an organization that tracks consumer confidence.

 

JEFF:

Yea, it’s basically, they survey consumers and ask them how they’re feeling about the economy.  I think the big take away here is, we could all see the drop in confidence from COVID, and that makes a lot of sense.  I think what maybe doesn’t make a lot of sense is, you know, we’re sitting here with very good employment levels.  Unemployment is at a 50-year low, 3.5%.  So, we’re all employed, we all have jobs.  But you can see confidence has come down significantly since last year, and it’s almost back to where it was during the height COVID.


TONY:

Yea, and Jeff you know, there can be a plethora of reasons for why this has happened. Perhaps, the most obvious, is the price of gasoline and as that has gone down, we have found that we just got an uptick this last month.  But these are present conditions.  Let’s take a look at our next chart, and this one expects, I guess, quite a bit different look for the future, right?

 

JEFF:

Yea, and this just splits the index into two.  The last one was how do you feel right now about the economy and how do you think it’s going to change, in the short term.  The present situation, like I said, everyone relatively has a job and so the present situation numbers look ok.  Everyone’s fairly happy where they are now, but it’s where do you expect to be.  And that’s where we see some issues.  And you can see, the expectation index is very, very low.  It hasn’t been this low since 2013.  And why that’s important Tony, is because if you feel like things are gonna get bad, as a consumer, you probably stop spending now, you start saving more to prepare.  If you’re business, it’s the same thing.  If you think things are going to turn down, maybe you don’t hire or maybe even trim your workforce.  Those things where you’re preparing for a recession, may ultimately be what causes it.

 

TONY:

Yea, and that’s the odd ball thing here Jeff, because people are feeling pretty good right now.  And yet, they, without any specific reason, are saying ‘but I don’t feel too good about the future’.  So, that’s consumer confidence for you.  Hopefully it’s not a self-fulfilling prophecy.  Only time will tell.

So, thank you Jeff.  And thank you for joining us for this latest edition of Chart Talk.

 

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