Aug 28. Consumer Confidence and stocks

Below is a chart with Consumer Confidence (in white, new high today at 133.4) and SPX (in amber, also new high). Obviously since 2008 these two are joined at the hip.
High consumer confidence is usually associated with propensity to spend by economists, and so is thought to be supportive of consumption. But confidence is locked to stock values as well, which suggests a “wealth effect” relating to consumption. Powell has tried to separate the idea of Wall Street and Main Street…. The economy is NOT the stock market. But this chart is fairly compelling evidence that the business of America is finance.
The lower chart shows the same two series over a different time frame, from 1991 to 2005. It was in the late 1990’s when Greenspan’s Fed was most concerned with the wealth effect as it related to Household Spending.

Posted on August 29, 2018 at 4:48 am by alexmanzara · Permalink
In: Eurodollar Options

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