Consumer confidence hits its lowest level in nearly a decade
The resurgence of the COVID virus and the looming conclusion to various stimulus programs and tax policies seem to be taking a toll on consumer confidence, which just hit its lowest level in nearly a decade, well below expectations (Exhibit A). That shift in confidence is showing up in retail sales, which fell 1.1% last month compared with June (Exhibit B). The largest drop occurred in auto sales, but other categories such as clothing and furniture also experienced declines.
Perhaps contributing to the decline in consumer confidence is the specter of inflation hanging over the market. The July CPI number (unadjusted), while indicating less concerning core trends, was still well above 5% (Exhibit C).
Source: The Daily Shot®
Source: U.S. Census Bureau fred.stlouis.org
Source: U.S. Bureau of Labor Statistics fred.stlouis.org
All of the above notwithstanding, the S&P 500® recently doubled from the market bottom in March 2020 – the fastest such occurrence on record.
Note: Dates indicated total length of each bull market, and bars show the trading days each took to double. Covers post-WWII era only. Source: S&P Dow Jones Indices (bull market dates, S&P 500 levels), CNBC analysis (doubling time). As of August 16, 2021.
As we pass the mid-month mark, international developed stocks are in the driver’s seat, with the MSCI EAFE Index up 1.24% in dollar terms and 2.09% on a fully hedged basis. Value stocks in the U.S. have also posted decent month-to-date returns through August 17th, with the Russell 1000 Value Index gaining 1.56%. On the other end of the spectrum, small cap stocks in general, and small growth stocks specifically have been suffering, with the Russell 2000 Growth Index off by 3.37%. Commodities, represented by the Bloomberg Commodity Index have returned -2.37%, with oil, gold and silver all in the red. Lastly, bonds have been treading water, with the yield on the 10-year increasing from 1.24% at the end of July to 1.26% recently, which has helped to push the Bloomberg Barclays U.S. Aggregate Bond Index down by 28 bps (basis points).
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INDEX |
INDEX DESCRIPTION |
Bloomberg Commodity |
A broadly diversified commodity price index distributed by Bloomberg Indexes. It tracks prices of futures contracts on physical commodities on the commodity markets |
Bloomberg Barclays U.S. Aggregate Bond |
A broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States |
Bloomberg Barclays U.S. Treasury 10+ Year |
Measures US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury with 10+ years to maturity |
S&P 500 |
Represents US large company stocks. It is a market-value-weighted index of 500 stocks that are traded on the NYSE, AMEX, and NASDAQ |
MSCI EAFE |
Measures the equity market performance of developed markets outside of the U.S. & Canada |
MSCI Emerging Markets |
An Index that captures large and mid cap representation across 27 Emerging Markets (EM) countries |
Russell 2000 Value |
Measures the performance of the small-cap value segment of the U.S. equity universe |
Russell 2000 Growth |
Measures the performance of the small-cap growth segment of the U.S. equity universe |