Consumer Confidence and Market Outlook

27Mar09

Consumer Confidence

With the Consumer Confidence Index (CCI) setting all time lows in January, at 37.7, and February at an astonishing level of 25.0 (1985 = 100), it will be very interesting to see where we stand when the latest reports are posted on March 31st.

We’ve talked a lot about investor behavior, the driving factors of fear and greed, and how that can ultimately sway market moves to further positive or negative levels. In our current market condition it would be very difficult to argue that the building fear through 2008 and early 2009 has not had a significant impact on market levels, stock prices and the overall health of both domestic and international economies. It most certainly has.

That’s not to say that consumer confidence acts as a significant creator of positive or negative economic conditions. It is a reaction to economic conditions, both reality and perception based, and has the power to build momentum and compound already existing movements.

At Sloy, Dahl & Holst we believe we are within the bottoming process, at the very least, and will hopefully be able to hold on to the gains we’ve seen over the last couple weeks. Even if we don’t, and move back to the March 9th lows or beyond, we anticipate a positive year by the end of 2009.

Remember that the market is forward looking, somewhere between six to nine months out. If a true economic recovery begins even as late as a year from now, the markets could begin moving in a substantial positive direction anytime between now and the next ninety days. We have just recently seen durable goods purchases pick up for the first time in eight month, as well as increases in housing starts, permits and sales. Once we continue to receive more favorable reports like these, coupled with an increase in consumer confidence, is when we could see a very big run.

Please refer to our December 4, 2008 entry, “Blink and You May Miss the Bounce”. Yes, the DOW is 10% lower today than it was on December 4th, and yes this is a much deeper bear market than most. However, if history holds truth and a reliable pattern, and the March 9th lows mark the bottom we could easily see a 10,000 DOW by this time next year.

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.

Best regards,

Ron Sloy

Learn more about Ron Sloy.

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