Post written by Eric Vermulm, CFA | Chief Investment Officer | Stockman Wealth Management
Consumer Confidence is one of the best leading indicators. Before every recession of the last 50 years, confidence has dropped. In December, it was weaker than expected.
Is this reversal a warning flag, or just a temporary bump in the road?
Through last fall, Consumer Confidence was hitting new highs for this economic cycle.
We were seeing some of the strongest readings since the late 1960s and late 1990s, both themselves at the end of long economic expansions.
This has us on alert – from these heightened levels, any sustained reversal will be a significant warning flag that the average consumer is becoming more cautious. The good news is that this was just a one-month downturn, hardly a negative trend.
Also, in past cycles, the peak in Consumer Confidence has come (on average) 12 months before the next recession and about 8 months before the peak in the stock market, so there should be some lead time.
While this recent downturn is not an outright warning flag yet, we will be closely watching Consumer Confidence in the coming months.