Consumer Confidence dropped to 59.7 from 69.0 last month. This comes out to a 13% drop in one month, a rather substantial drop in a short-term period.
What is interesting and worth noting, is it looks like low Consumer Confidence is actually bullish for the stock market. Think about it, when everyone has low expectations that can bode well to beat those lowered expectations.
Going back to 1980, there have been 60 occurrences where Consumer Confidence came in beneath 60 (like this month) and looking out the returns on the SPX aren’t too bad. That 3-month return of +3.3% and up 73% of the time really stands out.
What about the big monthly drop we just saw? Again, Consumer Confidence dropped 13% this month and looking at other drops of greater than 10% we find bullish results. 1-, 3-, and 6-month returns all beat the at-any-time returns after a big drop in Consumer Confidence.
Lastly, here is one of my favorite charts I’ve seen in a while. With the SPX up near the 1,550 area once again, you can see that Consumer Confidence is much lower this time around. In fact, back in 2000, Consumer Confidence was 145 versus just 60 now. Both times had the exact same SPX levels. Then throw in the 2007 peak, which had Consumer Confidence of about 110 versus the 60 now. From a longer-term perspective, this continually lower trending Consumer Confidence could have extremely bullish results for the SPX.