This morning’s University of Michigan Consumer confidence number popped out of its darkened hole, coming in at 59 (see charts), after bottoming in early November at 55. My bet here is that confidence continues to make higher lows alongside higher lows in the SP500. We spent the earlier part of this week buying stocks as American consumer confidence in Obama improved (over 70% of adults are either “hopeful, optimistic, or proud” of his becoming President per the Bloomberg/LA Times poll).
Stock markets are leading indicators. They build strength when confidence in them, on the margin, is improving. They break down when that confidence erodes. While there are plenty of reasons to be bearish (read the last year of my investment notes), most of these reasons are no longer a surprise. When the SP500 futures were down 4% pre-open, the stock market had already swan dived for a peak to trough 48% move. Sometimes it’s just priced into the market folks.
Today’s rally has to have the bears dizzied.