Happier with less?

The University of Michigan releases a monthly economic statistic measuring U.S. Consumer Confidence.  In the face of rising interest rates, rising fuel prices, higher mortgage rates and expectations for inflation to increase, Consumer Confidence is at a 5 year high.  With unemployment and under-employment remaining at near record high levels, job creation stagnant and GDP forecasts for the balance of the year being revised downward, what is the cause for this optimism?

It is true that the stock market is trading at record highs, but the equity averages have been trading in their own world and many don’t view them reflecting economic reality.  Most business executives are calling for a slowdown in economic activity in the second half of the year.

Much of the improvement in sentiment is being generated by stabilization and in some markets improvement in the residential real estate market.  A home is the greatest asset on most consumers’ balance sheets and improvement in the value of their home on a year over year basis is making them feel better.  Rising mortgage rates however may once again pull the rug out from under home buyers who have rushed into the market the past few years.

As you can see from the chart below courtesy of zerohedge.com, Consumer Confidence has been in a long term decline since 2000 and we may be peaking albeit at a lower level.  So while some are exuberant relative to the depressed levels seen in recent years, we should keep things in context.  Current readings are really no better than worst of times experienced from 2002 to 2007.  Are you feeling better off than you were in 2000?

If you find my market insights beneficial and would like assistance with your accounting and investment activities, please contact me, Christine Meder at Christine Meder’s Accounting Advisory Services.  My email is mederchristine1526@gmail.com and you can tweet me at @christinemeder1.  I’m offering a free 30 minute consultation through the month of August.  #unrbrand

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About Christine Meder
Leveraging my insights and professional experience of 25 years in the accounting profession, I and my firm Christine Meder's Accounting Advisory Services provide our high net worth clients expert advice on their business activities and investments. In addition to performing traditional accounting functions in a confidential manner, I pride myself in giving clients a competitive edge whether it be in running their businesses or managing their investment portfolio. My studies leading up to completion of the EMBA program at the University of Nevada, Reno this August provide me with latest skills and techniques utilized across a broad spectrum of business functions. This breadth of education is complemented with experience as an accountant in the construction, mining, real estate and technology fields during my career. If you are looking for a trusted adviser or consultant in addition to someone you can rely on to properly keep your books, please contact me.

3 Responses to Happier with less?

  1. josephvrusso says:

    I think you said this, but what struck me was the idea that perhaps high confidence was too high in past years and that we are indeed at the “new normal.” As with Global Warming and my search for the “right temperature,” I wonder what the “right” confidence level is?

    • Hi Joe, I like your comment and reference to “new normal” and “right temperature” but today’s relatively high levels of consumer confidence given the weak state of employment and residential real estate market have me concerned that we as nation are settling for less. Yes, there were excesses and abuses that led to economic volatility but at least the future promised ‘better times’. Unfortunately, content with just a little more, I don’t see better times on the horizon any time soon.. at least in the U.S. Perhaps I should be joining you in Australia soon?

  2. Pingback: Home, sweet… or not so sweet, home. | Christine Meder's Accounting Advisory Blog

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