Consumers ‘do believe in the green shoot story’

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This is the conclusion that Wachovia Chief Economist Mark Vitner draws from the very bullish consumer confidence number we have just seen.  To fill you in on the details, the Conference Board said its Consumer Confidence Index leapt from a poor 40.8 reading in April to a less poor 54.9 reading for May. This was the highest reading in eight months.  But, the present situation is terrible, 28.9.  It is expectations that are through the roof with the reading jumping over 20 points from 51.0 to 72.3.  That is a gargantuan one-month move.

Let’s remember that confidence does not translate into consumption, especially as most of the uptick here was in consumer expectations.  Nevertheless, this has grabbed the market’s attention and U.S. stocks are up well over 2% as I write this.  If you were wondering whether the powerful market rally from March has legs, this should come as proof that it does.  The S&P 500 is now above its 20-day average trendline again.

I should caution that an uptick in expectations of this magnitude has a dark side.  If the economic data disappoint in June, we could see a sharp selloff.  That makes the June data and the early July earnings reports very crucial data points.

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The Conference Board Consumer Confidence Index™ Increases Sharply – Conference Board

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