Money Bits Blog

This morning the Conference Board, an independent economic research organization, released results of its most recent Consumer Confidence Survey®. The survey results are in the form of two indices, Consumer Confidence Index® and the forward-looking Consumer Expectations Index®. Both indices were down sharply from May’s numbers. The monthly surveys are based on a sample of 5,000 US households. The most recent survey was of households through June 22^nd.

Here is a summary of recently-published survey results.

The Consumer Expectations Index® also dropped dramatically to 71.2 from 84.6 in May.

What happened?

The Conference Board attributes the drop to a slowdown in job growth. Of the surveyed households, 44.8% claimed jobs are “hard to get” (versus 43.9% in May). Those who responded that jobs are “plentiful” decreased to 4.3% from 4.6% in May.

How did the stock market react?

As of 9:30 this morning, 6/29/10, the Dow 30 Industrials Average is down 235.1 points or 2.3%, the Standard and Poor 500 Index is down 2.5%, and the Nasdaq Index is down 3%.

Is a recession double-dip ahead?

No, I don’t believe so. Remember, we’re talking about a “slowdown in job growth”, not increased unemployment. The Conference Board’s other much-watched index, the U.S. Leading Economic Index®, continues to rise. The LEI is credible, it accurately predicted the beginning and end of the Great Recession. The index increased 0.4% in May. Since May’s index was completed and released on June 17^th, it is expected to reflect current economic activity.

What to do?

From an investor’s perspective, I believe large cap value stocks hold the best promise for July through September. In particular, I like dividend-paying, classic growth companies. I believe the 4^th quarter 2010 will bring better stock market conditions. For fixed income investors, now is not a good time to buy. Yields are at historic lows and prices are high. Both conditions will re-adjust to long-term averages during the next 2 to 5 years.

[Comments made by Rod Roath are designed to stimulate thought and discussion. They are not to be relied upon without a complete investment analysis, and full consideration for individual investment goals, time lines and volatility assessments. Information presented herein is obtained from sources believed to be reliable. We do not warrant or guarantee the timeliness, completeness, suitability or accuracy of any information posted in this commentary. Nor should any historical information posted here imply that past results are an indication of future performance. Opinions expressed herein are solely those of Money Matters, Inc.]