On May 26th, as a result of consumer confidence surging despite a deteriorating job market and eroding home values, I arrived at the conclusion that the stock market rally was the reason for the increase in consumer sentiment, there was no other explanation.
The flaw in this "confidence" was of course that the stock market rally had no economic basis, it was built on sand. The source of the rally was hope rather than an actual healing of the economy. The tail was wagging the dog.
Well, here we are on July 10th and the market looks to be returning to low tide. Not surprisingly the result of a recent Reuters/University of Michigan Surveys of Consumers reveals that the index of consumer expectations plunged to 60.9 from June's final reading of 69.2. Additionally, the index of current economic conditions fell to 70.4 from June's final reading of 73.2.
According to Reuters, "Consumers concluded that the economic downturn would last longer and their personal finances would not recover as quickly as they had previously expected".
No kidding. And why would they? Even CNBC's Jim Cramer has written that Obama's economic policies, or the lack of an effective stimulus, has hurt the economy.