We keep going back to our August 4, 2019 posting where we said the following of consumer sentiment:
“A trend doesn’t define the future prospects. However, we believe that the [consumer sentiment] declining trend has not completely played out. This means that we expect that the economy and stock market will languish, in the best case scenario.”
The Economy
The Stock Market
With the stock market at a zero percentage change from the August 5, 2019 level and the Industrial Production Index at crash worthy lows similar to 2008/2009, we think that our targets have been achieved. However, we’re still very concerned about the risks going forward.
Consumer Sentiment 1953-2020
The chart below reflects the year-over-year comparison of the University of Michigan Consumer Sentiment survey and the Dow Jones Industrial Average on a monthly basis from 1953 to June 2020.
Our claim has always been that the Dow Jones Jones Industrial Average IS the consumer sentiment indicator in real-time. The entire existence of the University of Michigan Consumer Sentiment survey, as represented above, has matched the stock index except for one very important element, the Dow Jones Industrial Average goes back to 1896 while the University of Michigan Consumer Sentiment only sporadically goes back to 1947.
Dow Jones Industrial Average 1897 to 2020
The chart below reflects the year-over-year in the Dow Jones Industrial Average on a monthly basis from 1896 to June 10, 2020.
The red dashed horizontal line in the chart above shows the March 23, 2020 low of the Dow Jones Industrial Average on a year-over-year basis. Going back to the inception of the data on the University of Michigan Consumer Sentiment survey we find that the stock market has generally settled at the March 23, 2020 lows and recovered.
Additionally, the University of Michigan Consumer Sentiment has declined almost to all-time lows (already!!!). With the newly published numbers for the University of Michigan Consumer Sentiment survey coming out on June 12, 2020, we expect that we’ll have achieved a first for the survey by falling below all prior low levels.
The rapidity of the stock market decline and recovery and failure to achieve new highs suggests that the Dow Jones Industrial Average, as a sentiment indicator, will retest the prior low (-15.47%) opening up for testing of past graveyard levels.
See Also: June 12, 2020 Survey Update