Not since September of 2008 - just a few days before the bear market went from bad to stunningly awful - has consumer confidence been as strong as it is now. The Conference Board's consumer confidence reading scored a 57.9 for April... the first time consumer's moods have been higher than the reading of 61.4 from September of 2008.
It's also a stark turnaround from February's reading of 46.40, when a slight downtrend in confidence levels sparked fears that the economy was headed back into a recession just as investors were seeing signs that we were on the way out of it.
Michigan Sentiment Index to be Announced on April 30th
The comparable Michigan Sentiment Index has yet to be reported for April, though forecasters expect to see it come in at 72.0 when it's released on Friday, April 30th. That would be an encouraging improvement from the preliminary figure of 69.5 announced two weeks ago. Yet, it would still be under March's level, and the second move lower in the last three months.
Between the two, the Conference Board's measure tends to be a little less erratic and a little more reliable as an indicator for investors. In either case though, the direction of the trend (as opposed to any particular level, or even one good or bad month) is the only consistently-valuable interpretation for investors.
Confidence Trend More Important Than One Month's Change
Generally speaking, one would need at least three months' worth of data from these two indicators to determine an actual trend. Ideally though, six or more months' worth of data would be factored in.... though that creates more of a delay than most investors care to tolerate.
The six-month moving averages are plotted - in black - on top of the two confidence data charts. As it stands right now, the Conference Boards' data is trending upward, while the Michigan Sentiments Index data is actually trending sideways Friday's reading may change that trend's direction, however.
On the flipside, knowing it takes three to six months' worth of data to come to any meaningful conclusion with these charts, using this data to 'swing-trade' may not be an effective usage even though some traders attempt to do so. This is longer-term data, most helpful for buy-and-holders who still seek to scale out of stocks when major tops are being made, and to scale into stocks at major market and economic bottoms.
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James Brumley - As a former stock broker and analyst, turned writer, James Brumley can tell you what most advisors can't - or won't. His belief is that ...
