The most recent Conference Board index number that came out for August is the highest since October 2000. The number increased to 133.4 from 127.9 in July. Various factors that include very resilient and strong job market, helping Americans feel even more confident about the economy generally and their own in particular. This level is higher than 94% of the time going back to 1967 when we started measuring Consumer Confidence.
Number of Consumers saying jobs are hard to get decreased from 14.8% in July to 12.7%. Often the assessments is that very high confidence point towards continued good economic development.
“Overall, these historically high confidence levels should continue to support healthy consumer spending in the near term,” said Lynn Franco, the Conference Board’s director of economic indicators according to WSJ
With this said often high consumer confidence does not mean that the stock market will continue to increase. Looking at the below chart actually almost the opposite rings true.
Looking back the only times that this Index reached above 130 is: 1969, 1997 and 2000. In all those three instances there was severe market correction just post confidence hitting the high. In 1969, it was the market meltdown, 1997 it was the Asian Crises and 2000 it was the busting of the tech bubble. This is something that Octavia Costa at Crescat Capital points out.
As we have discussed earlier here at Askbrokers.com, there are plenty of factors out there that not only will affect consumer confidence, but also the market. These can be inflation, trade wars and tariffs, elections and geopolitical instability.
With markets at all-time highs, as a trader from a risk management perspective, it is important to be vigilant on various developments in the world. It does not mean that the market will stop continue to rise, but it is imperative to have a good sense of various indicators that might give good sense of tides turning.
Hedging is never being a coward.