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TheBRRR’s Thoughts

I wanted to send a note before the weekend because we got a huge shocker from the Michigan Consumer Confidence Survey shortly after we finalized the email this morning.

TL;DR: The US consumer is hurting and pessimistic. The chart below illustrates that estimates for the month were completely wrong and that this was the biggest miss vs expectations for consumer confidence in 24 years.

Here are all 5 data points and their pre-reveal expectations from the report:

Consumers also expect inflation to still be at 3.5% a year from now, while the Fed’s own estimates project inflation to be in the 2.5% range.

The Nasdaq gave up all of its premarket gains and sits unchanged for the day, while the DXY (dollar index) reversed its recent weakness and is marginally higher for the day.

Crypto immediately sank to the lows of the week with bitcoin leading the move lower from $63k to $60k.

We think this only increases the odds of fiscal stimulus before the election, but markets aren’t pricing a dovish response into the cake. Markets are interpreting this bad news as bad news, which is a stark contrast from other recent data.

Here’s out AI-generated summary of the story:

What Happened:

• The University of Michigan's latest survey showed a significant drop in consumer sentiment, marking the largest miss on expectations ever recorded.

• The Sentiment Index plummeted from 77.2 to 67.4, a dramatic decline of 9.8 points, surpassing the anticipated index value of 76.2.

• Both components of the index, current conditions and expectations, fell sharply below estimated levels.

Why It Matters:

• Economic Outlook: This unexpected drop signals potential challenges ahead for the economy, as consumer sentiment is a key indicator of economic health and consumer spending.

• Inflation Concerns: The report also highlighted a rise in inflation expectations, with the one-year outlook increasing notably from last month's figures, suggesting that consumers are bracing for higher costs.

• Interest Rates: There's growing concern about high interest rates, with a significant decrease in the percentage of consumers who expect rates to fall over the next year.

• Market Impact: Such stark data impacts market sentiments and could influence Federal Reserve policies, especially as they navigate between controlling inflation and supporting growth.

• Survey Methodology Shift: The change from phone to online survey methods could be influencing the results, potentially offering a more candid reflection of consumer perceptions.

Takeaway: The latest figures are a stark indicator of consumer pessimism, reflecting concerns over inflation and interest rates that could lead to a pullback in spending, challenging the economic outlook further.

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Got feedback? Follow the writer on Twitter @frank_locascio and send a message.

The BRRR is meant for informational purposes only. It is not investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.ll