Consumer Index and the Stock Market
October 6, 2009 by ryan · Print This Article
Whether a buy and hold investor, swing trader or even a day trader, the consumer confidence is a very influential component that contributes to the rise and fall of the stock market. When consumers are confident in their financial situation, it is only logical that they will be more free with their money, boost the economy, and stimulate the stock market. Unfortunately, the reverse is also true. And what is real and what is being over hyped by the media can make huge impacts in both short and long term investments.
The Consumer Confidence Index, or CCI, is used as a basis of measurement to judge the emotional economic climate. The CCI is based upon the purchasing plans of consumers over the next six months and is intended to give a general idea of how money will be spent. This index becomes especially important before the holiday shopping season due to the huge economic impact of retail sales during this time. Wouldn’t it behoove the US government to insure a higher than true CCI? While the CCI is closely followed by investors it is rarely accurate. Currently you can flip the news channel and hear (depending on Party support) anything from the US Economy is poised for a record Christmas with consumer spending levels soaring or if on Fox you will hear there is a mass exodus and US heading for worst depression in history.
A worried consumer base who is unsure of job security and investments will spend less, invest less, and generally influence the health of the stock market negatively. The current economic climate Consumer Confidence Index is 53.1. In comparison in February of 2009 the CCI was hovering between 20-25 and in 1985 it was 100. Read More
Just this week we are hearing stories that early indicators of the so called “stress test” were painted and spun into a much rosier picture of what level of recovery we have actually achieved. Some economists and Jim Rogers (see this week’s Words of Wisdom YouTube video) are predicting an outfall similar to that of 1929 recessions where legislation and American and European politicians got overly involved with the world banking and caused the worst depression in history.
Use the CCI cautiously and monitor the economy from news worthy sources other than main stream media.
Whether a buy and hold investor, swing trader or even a day trader, the consumer confidence is a very influential component that contributes to the rise and fall of the stock market. When consumers are confident in their financial situation, it is only logical that they will be more free with their money, boost the economy, and stimulate the stock market. Unfortunately, the reverse is also true. And what is real and what is being over hyped by the media can make huge impacts in both short and long term investors.
The Consumer Confidence Index, or CCI, is used as a basis of measurement to judge the emotional economic climate. The CCI is based upon the purchasing plans of consumers over the next six months and is intended to give a general idea of how money will be spent. This index becomes especially important before the holiday shopping season due to the huge economic impact of retail sales during this time. Wouldn’t it behoove the US government to insure a higher than true CCI? While the CCI is closely followed by investors it is rarely accurate. Currently you can flip the news channel and hear (depending on Party support) anything from the US Economy is poised for a record Christmas with consumer spending levels soaring or if on Fox you will hear there is a mass exodus and US heading for worst depression in history.
A worried consumer base who is unsure of job security and investments will spend less, invest less, and generally influence the health of the stock market negatively. The current economic climate Consumer Confidence Index is 53.1. In comparison in February of 2009 the CCI was hovering between 20-25 and in 1985 it was 100.
Just this week we are hearing stories that early indicators of the so called “stress test” were painted and spun into a much rosier picture of what level of recovery we have actually achieved. Some economists and Jim Rogers (see this week’s Words of Wisdom YouTube video) are predicting an outfall similar to that of 1929 recessions where legislation and American and European politicians got overly involved with the world banking and caused the worst depression in history.
Use the CCI cautiously and monitor the economy from news worthy sources other than main stream media. The left will give a too high of CCI and the conservative right news always too low.
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