Consumer Confidence Finally Weakens

Since hitting a low on March 23^rd, stocks have regained approximately 60% of their losses off of all-time high levels.  The stock market rally continues once again today, as investors remain hopeful for a quick economic recovery as states begin to re-open.  With the Unemployment Rate expected to currently be over 20%, we know that not all who have lost their jobs will be invited to return to work.  The impact of Covid-19 has already forced many businesses to fail or at least permanently scale back.  When this time passes, we expect to see an Unemployment Rate of 7% or higher.  Further, with a negative GDP growth rate, this is not an environment that justifies stock prices at current levels.

The Consumer Confidence report for the month of April came in at 86.9.  This is a long drop from the last monthly report of 120.  As people realize that we will likely see a slow start after states allow businesses to reopen, we can expect to see future Consumer Confidence reports decline.  As this happens, it will cause a drag on both the US stock market as well as other markets.  History shows the value of consumers’ attitudes on the economy.  As pessimism seeps in, and consumers struggle more with their personal finances, the economy naturally follows.

With the Fed maintaining stability in the bond market, there is little incentive to float.