University of Michigan Consumer Sentiment Still Strong

Alan Penny

8 November 2019

3 min read

dollar notes under US flag

  • Although missing slightly, still at high levels
  • Could show signs of US consumer being strong still
  • Consumer 70% of US GDP

During the Friday session, the University of Michigan Consumer Sentiment reading came out in its preliminary form, released at 95.7 for the month. Originally anticipated to be 96, although the market did miss slightly, the reality is that it is still a relatively high and strong figure. At this point, market participants will read this as another indictment on the US consumer, which is 70% of the GDP in the United States.

That being said, the fact that the number missed caused an initial cringe in the markets. But overall, it is a scenario that favors the US markets in general, as the consumer seems to be alive and strong.

This will cause money to flow into the US stock markets, but there are also other concerns around the US-China trade situation as well.

Retail season

The main push will probably be in the retail sector as we are starting to head towards the holidays. If consumer sentiment continues to be relatively strong, that should trend well in the stock market for retail heavyweights. The market will continue to see a lot of inflow in the United States due to a strengthening US economy, while the rest of the world wilts.

However, the retail sector has been a bit of a laggard in the United States. This may be exactly what traders will need to feel confident about buying these larger retailers, as a bulk of the profits will be coming in the next couple of months.

No sign of trade concerns

As odd as it may seem, there is a huge disconnect between consumers in the United States and the US-China trade tariffs. In the business media, far too many pay attention to the corporate fallout from the tariffs and trade war, but the US consumer has barely blinked at the slightly higher prices.

one could say that the tariff situation in the United States has been completely overblown

At this point in time, market participants still probably add too much weight to the idea of the consumer fallen off the cliff due to slightly higher prices, but this has not been the case. In fact, one could say that the tariff situation in the United States has been completely overblown.

Steady going forward

It’s very likely that the consumer will be steady going forward, and that is a major driver of market sentiment in general. At this point, stock markets in the United States are pressing all-time highs, so although this is a good sign, expecting the market to explode to the upside would probably be too much.

This is simply another piece of the puzzle that shows that the United States will continue to attract a certain amount of monetary flow. Because of this, the markets in general should continue to follow the same pattern that we have seen for a couple of years: favoring the American markets above all else.

Written By
Alan Penny

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