Latest / Markets with Megan: A Quick Financial Markets Update / Reading the Economic Tea Leaves Through Consumer Confidence | Episode 121 | 04-12-2024

Transcript

Reading the Economic Tea Leaves Through Consumer Confidence | Episode 121 | 04-12-2024 · Markets with Megan: A Quick Financial Markets Update

• 0:01
  Megan Horneman: The inflation situation isn't letting up everybody.
• 0:04
  Megan Horneman: This is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors, coming to you today.
• 0:10
  Megan Horneman: It is Friday, April 12th, and we're going to discuss the University of Michigan Consumer Confidence Report that came out today.
• 0:17
  Megan Horneman: This report comes out each month.
• 0:19
  Megan Horneman: It comes out twice.
• 0:20
  Megan Horneman: It comes out in the first part of the month with a preliminary reading and then it comes out in the second half of the month with the final reading, and what we're seeing in the first two weeks of April is that consumer confidence is sliding.
• 0:33
  Megan Horneman: Let's dig into a couple of the numbers and then we'll talk about what came out from an inflation perspective in this report.
• 0:38
  Megan Horneman: First of all, the headline number this did decline.
• 0:41
  Megan Horneman: It was the second time in the past four months.
• 0:44
  Megan Horneman: The current conditions this report is it was the second time in the past four months.
• 0:48
  Megan Horneman: The current conditions this report is made up of two different components the expectations for the future and the confidence there, and then confidence in current economic conditions.
• 0:55
  Megan Horneman: Both of these fell for the month.
• 0:56
  Megan Horneman: The current conditions and the confidence there that fell the most in.
• 1:01
  Megan Horneman: That's the lowest we've seen in seven months.
• 1:03
  Megan Horneman: And when you look at the future expectations, that also did decline.
• 1:08
  Megan Horneman: So from a consumer confidence perspective, it's not great.
• 1:11
  Megan Horneman: This does tend to be a leading indicator for spending, for consumer spending.
• 1:16
  Megan Horneman: But what's more concerning and what?
• 1:19
  Megan Horneman: One of the reasons why the markets are down today is not necessarily that we have weak confidence.
• 1:24
  Megan Horneman: We've had many readings of weak confidence throughout the past year, but it was the inflation expectations.
• 1:31
  Megan Horneman: So the University of Michigan also polls the consumers and what they think the inflation rate will be over the next year and over the next five to 10 years.
• 1:42
  Megan Horneman: The Fed looks at this, because if there is a consumer that thinks inflation is going to be higher in a year, then what happens is sometimes consumers will pull spending forward and then it just exacerbates the inflation problem.
• 1:55
  Megan Horneman: And what we saw is expectations for inflation over the next year.
• 1:59
  Megan Horneman: They moved higher, now to 3.1%, so moving in the opposite direction of where the Fed wants to see.
• 2:05
  Megan Horneman: They want to see it down to 2% and then over the next five to 10 years, where the Fed definitely wants to see that anchored closer to 2%, consumers are expecting inflation to be around 3%.
• 2:18
  Megan Horneman: So this is a concern.
• 2:20
  Megan Horneman: The Fed will be looking at this.
• 2:21
  Megan Horneman: We'll hear comments about it from the Federal Reserve, but markets are lower today.
• 2:28
  Megan Horneman: A little bit has to do with this.
• 2:30
  Megan Horneman: A little bit has to do with the fact that we started earnings season and JP Morgan had some disappointing earnings in their report.
• 2:38
  Megan Horneman: And then the last thing is geopolitical tensions that are heating up between Israel and Iran.
• 2:43
  Megan Horneman: All of this is contributing to a pretty poor week in the equity market.
• 2:46
  Megan Horneman: That's all we have this week.
• 2:48
  Megan Horneman: We hope everybody has a wonderful weekend.
• 2:50
  Megan Horneman: We'll be back next week.
• 2:51
  Megan Horneman: We've got some big data reports retail sales information on housing so we'll be back to report there.
• 2:57
  Megan Horneman: If you have any questions or comments, please feel free to reach out to podcasts at verdence dot com and make sure you hit that subscribe button and the alert bell so you get notified every time we put a new episode out with Markets with Megan.
• 3:08
  Megan Horneman: Thank you.