We’ve seen some pretty solid earnings out of the gate (so far) this earnings season. So far, 82.9% of the 41 S&P 500 companies which have reported earnings are besting the analysts’ expectations. That’s a sign of a healthy market. 😊
But what about the economy? Well, employment is rising and wage growth indicates that the U.S. is recovering from the worst of the COVID-19 pandemic. However, some academics say that the U.S. might be in recession in spite of all that good data. 😲
A decline in consumer sentiment and expectations is pointing to a sad state of affairs in the U.S. economy. In its latest report for Oct. 2021, the University of Michigan’s Consumer Sentiment Index was down in every category both month-over-month and year-over-year. 📉📉📉
The Conference Board’s gauge, another consumer confidence poll, has also fallen. It has deflated for three straight months. The Morning Consult’s own Daily U.S. Consumer Confidence Indices shares the decline from COVID highs in May 2021. In the Morning Consult’s own survey, their future expectations score has been lower than their current conditions measure since Jul. 2021.
According to the researchers, “[the] downward movements in consumer expectations in the last six months suggest the economy in the United States is entering recession now.” Bloomberg says that slumps in consumer confidence and expectations are predictive in advance of a recession.
While the market might be doing well, it begs a repeat of this age-old (and highly annoying) question: how indicative is the stock market of the whole economy? 🧠