From the desk of Willie Delwiche.
The preliminary May reading for the Consumer Sentiment Index (published by the University of Michigan) dropped to one of its lowest levels on record. The Expectations component is still above its March low, while the view of Current Conditions is at new cycle low - and at its lowest level since late 2008. That’s right - things are seen as worse now than they were at the worst of the COVID-related shutdowns. At one level this seems ludicrous - the S&P 500 is just a few months removed from record highs and pretty much anyone who wants a job can get one. On the other hand, everyone is seeing surging prices at the grocery store and gas station. They see surging balances on their credit card statements, but collapsing balances on their brokerage statements. This an unfamiliar environment for an entire generation of investors who have never experienced a double-digit year-over-year drawdown in the NASDAQ 100. It’s particularly acute for investors who listened to the advice of “experts” and have bought every dip this year. We don’t need to look at this incredulously and suggest things aren’t actually as bad as they have been in the past. Rather, acknowledge that conditions for consumers are getting worse not better and the current mood reflects that.
