Home values are depressed, unemployment continues to be high, gasoline prices are also high, and there seems to be endless global uncertainties. So, it’s not surprising to witness consumer sentiment treading near all-time lows. The University of Michigan Consumer Sentiment Index (MCSI) is a consumer confidence index published monthly that monitors consumer expectations regarding the overall economy. Recently the University of Michigan Consumer Sentiment Index, analysis provided by JP Morgan, revealed some interesting data that could provide great solace for investors spiraling down in a world of negative consumer sentiment.
After digesting the chart above, let’s take a closer look at the past consumer sentiment troughs (bad times) followed by S&P 500 returns over the next 12 months. The results may surprise you! The S&P averaged 23.3% over 12 months following a sentiment trough. Conversely, 12 months following peaks (good times) in consumer sentiment averaged only 1.1% per year.
5 Personal Take-Aways from this Study:
- Don’t attempt market predictions based on the data
- Become a mindful investor
- Remove emotions from investment decisions
- Use evidence based research and studies when faced with financial decisions.
- When the world seems to be coming to an end – it probably isn’t
So rather than focusing on the negative, arm yourself with knowledge. As a result, you will feel a sense of enlightenment in which fear, greed and delusion can be overcome. Not a bad place to live and breathe!
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does don constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James. The S&P 500 is an unmanaged index of 500 widely held stocks that’s generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results