Brandy Auterson:
It’s now time for 4 Your Money. We’re joined by James Nelson, financial advisor at NelsonCorp Wealth Management. Welcome back, James.
James Nelson:
Thanks, Brady.
Brandy Auterson:
So while we have seen a little turmoil in financial markets recently, the labor market is strong and consumers seem to be in good shape. However, there are some inconsistencies that are out of sync with that view. Could you share your thoughts on that?
James Nelson:
Yeah. There’s a lot of ways that we can gauge consumer sentiment and behavior. And one of the most common is looking at surveys. And I want to talk about maybe the most popular survey that measures consumer attitudes and behaviors, and that’s done by the University of Michigan. So we’ve got a chart here that’s going to show this. And it basically brings us back to the early 1990s. And the blue line represents, if it’s a higher reading, it represents a higher level of confidence. A lower reading shows that there’s more pessimist view on how things are going.
James Nelson:
So when we look at the chart, we see that starting back in the late ’90s, there was a notable downward trend in consumer sentiment that lasted through the financial crisis of 2008. From that point to basically when COVID started in 2020, we had a pretty strong advance there for a number of years. Now, if you look in early 2021, that seems to be where we peaked, and that was the high point. And maybe a few interesting points here. It’s surprising that we’re basically not too terribly far off on a pessimistic view from where we were back in 2008, 2009. Not that we’re to those levels, but we’re not far off those levels. And I think that’s surprising to some people, given the shape that the economy’s in right now versus back then.
Brandy Auterson:
Okay. So what does this type of measure tell us with regards to viewers’ investments?
James Nelson:
Yeah. So watching something like consumer sentiment can give us a gauge on how things are going. And in sense, a significant portion of the US economy is based off spending. A weak reading would be a precursor sure to maybe a weak period of time as far as economic activity, which would then be reflective in the stock and bond market. Weaker spending also hits different areas of the economy. Consumer discretion would probably take a hit while consumer staples probably stay pretty strong. And then if you look at a contrarian type view, going back to a 2008, 2009 scenario, things looked so bad on this survey that it was almost a turning point. It was so bad, it turned into a good thing. So that’s how we look at things.
Brandy Auterson:
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