In the Early look on Thursday, we highlighted a glaring disconnect in today’s HIGH-LOW society.  The most obvious example of this is the dichotomy between Wall Street and Main Street. 


Yesterday the S&P 500 hit 1,211 (up 8.7% YTD and 14.6% from the February low) and today the Reuters/University of Michigan Consumer Sentiment Index is at a 5 month low and 6% below where it was in February. 


The Reuters/University of Michigan preliminary April Consumer Sentiment Index fell to 69.5 from a 73.6 in March.  A Bloomberg survey projected the sentiment index would be 75.0. The estimates ranged from 73 to 80, so nobody got it right!


The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, slumped to 62.3, the weakest reading since March 2009, from 67.9.  As a point of reference, the Consumer Discretionary (XLY) was index was 40% lower in March 2009.


No one can accuse of us on being shy about our views on inflation, but we are not the only observers seeing inflation.  In today consumer confidence report, the survey said they expect an inflation rate of 2.9% over the next 12 months, up from 2.7% last month. 


While the FED and other compromised groups want to look at the “core” inflation rate, the consumer cannot escape the reality they face at the pump and elsewhere. 


We remain confident in our Q2 theme - Inflations V-Bottom!


Howard Penney

Managing Director



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