Consumer Confidence and Investor Behavior

28Jan09

One thing I know for certain is that by nature, on the whole, people are poor investors. We are driven by fear and greed, and by the good or bad news we’re inundated with on a daily basis. This clouds the vision necessary to stay the course and makes it very difficult to keep a clear long term perspective. In today’s economic state, and with what seems to be a never-ending stream of bad news, this couldn’t be any closer to the truth. A perfect example of this is the Consumer Confidence Index, measured against market values and the cash flow into domestic and international equity mutual funds, and exchange traded funds.

The US Consumer Confidence Index is an indicator designed to measure consumer confidence, which is defined as the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending. Basically, it measures how people feel about the US economy. Just now, in January of 2009, we’ve set an all time low of 37.7 since inception in 1967. In 1980 the Index was at an even 100 and even looking back just a short 24 months ago we saw an Index of 87.3.

Just as we’d expect, right along with this new low, we’ve been experiencing the largest volumes of cash flowing out of the markets in the last decade. So how does this all tie into my initial statement about poor investor behavior? All of these people are moving their money out at the wrong time and selling at a low. A good investor would buy at a low and sell or book profits on a high, right? The constant bad news and poor market conditions we’ve been experiencing are driving fear straight into the grand majority of investors and they’re running for the hills.

The bottom line is that “good” investing is not easy. We’re driven by fear and greed, and when things are as bad as this what you’re feeling in the pit of your stomach is the first of those two. So what you need is a plan, and you should consider one of two options. Either keep your television off and stay in bed, or work with a credited financial advisor to help you maintain the course of good, sound investing.

Please feel free to reply to this entry or contact our office if you have any questions regarding this material, or any other financial inquiries we might be of assistance with.

Stay the course and tune out the media gloom.

Yours truly,

Ronald J. Sloy

Learn more about Ron Sloy.

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2 Responses to “Consumer Confidence and Investor Behavior”

  1. LOL on your following comment: Either keep your television off and stay in bed, or work with a credited financial advisor to help you maintain the course of good, sound investing. I do agree however even after I laughed. The media needs to start reporting positive news. Its seems once the spiral downway its hard for the consumers to be positive and to get them back out and fighting again. Not all companies are closing their doors. Many are prospering during this economic downturn. Real Estate Investing has never had more deals. Today is the time to buy not when prices skyrocket again. Then you should run for the hills…..

  2. 2 ronsloy

    Thank you very much for reading my blog, and for your response. We couldn’t agree more. Now is a great buying opportunity almost completely across the board, and especially in real estate. Cash is king. Also, I’m glad to see we got a laugh out of you. When things are as tough as we’ve seen recently you need to find a way to look at the positive and break out a smile or two.

    Thanks again,

    Ron Sloy


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