We've had four sets of confidence indicators out of the US in the last couple of days. They tell a story of sustained main-street economic confidence contrasted with a sudden gap-down in financial market confidence. This seems to me to be eminently reasonable, given near=full employment and the prospect of monetary tightening.
The NFIB small business optimism index really did nothing, rising 0.5pts to 98.9, which extends the modest recovery of the last couple of months. Expectations for the coming six months remain sharply negative despite rising 3pts to minus 35.
But for me, it's the NY Fed's monthly survey which is the king of US sentiment surveys. What get's advertised is the movt in inflation expectations, and there was little to report from Dec's survey: 12m expectations were almost unchanged at 5.99% and so were 3yr expectations at 4%. House price inflation expectations rose slightly to 5.5%, and chances of moving home down slightly at 16.7%
But the survey doesn't end there: it looks at the full spectrum of household attitudes and expectations: employment, chances of getting a new job, expected earning, expected spending, expected taxes; difficulty of getting credit. There's almost too much to take in. What did it tell us in Dec? I think overall, the Fed will be pleased - US households seem both basically confident but decently sceptical of their good fortune.
Compared to November, expected wages were up a bit 2.97%, and h'hold income up a bit at 3.37%, but spending down a bit at 5.53% and taxes down a bit at 4.4%. Credit availability slightly less difficult than in November. Likelihood of losing a job retreated to the lowest on record, and the chances of finding a new job quickly rose to the highest since Feb 2020.
And what do people think about financial markets? Well, 28% expect interest rates on savings accounts will rise this year, which is 0.7SDs below the l/t average. Meanwhile, 38.9% expect the stockmarket will rise this year, but that's 0.8SDs below the l/t average. This looks basically not encouraging.
And so on to direct measurements of stockmarket confidence.
Today we had the IBD/TIPP index, which tracks economic optimism among investors, sank 7.6% mom to the weakest since July 2020. That's what they say, but what are investors doing?
Yesterday we had the December investor movement index, which tracks actual behaviour of Ameritrade clients. That dropped 9.6% mom in December, to the weakest since February, coming off a plateau it has enjoyed since last March last year.
Ameritrade's results are similar to what we heard out of State street on 29th December, when its investor confidence index - also calculated by looking at what people are actually doing with their money - dropped no less than 25.9pts to 85.6, which was the worst since October 2020. The US fell 14 pts to 96.4, which again is a drop-off from a plateau its held since July. But the real killer came from European investors, with the index down 27.8pts to 67.6, which is lower than at any time during the pandemic.
