Breaking Down the December Consumer Confidence Report | Episode 084 | 12-20-2023

In this episode of Markets with Megan, Chief Investment Officer Megan Horneman, provides insights into the December Consumer Confidence Report. The report reveals a significant surprise, surpassing expectations with the highest levels of consumer confidence since July. Megan breaks down the index's components, emphasizing the positive impact of decreasing interest rates and the recent dovish stance of the Federal Reserve. Despite the optimistic outlook, she suggests against unwarranted optimism and highlights potential risks for the economy in the coming year. Megan also notes the need to monitor consumer spending closely, as excessive confidence could reignite inflation, undoing the Federal Reserve's efforts. Stay tuned for more insights on the PCE deflator later this week, and for any questions or comments, reach out to us at podcast at Verdence dot com.

Hello, this is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors. We're coming to you today with our regular segment of Markets with Megan and we want to talk about the Consumer Confidence Report that we received this morning. So we got Consumer Confidence from the conference board for the month of December and it is similar to some of the housing data that I gave you guys this week. This is a good report. A major, major upside miss from the expectations. The expectation was for it to rise just modestly, but we actually saw the biggest rise in consumer confidence since March of 2021. This index has two different main components it's confidence on the present situation as well as the future situation for the economy, and both of these rose to the highest level that we've seen since July of this year. When we break this down actually by income and then also by age, from an income level, the biggest increase was those earning under $25,000 a year, as well as those earning over $125,000 a year, and the biggest increase from the age breakdown was in the 35 to 54 age range. So a really solid report here from Consumer Confidence. This is driven primarily by the fact that interest rates have come down.

The Fed was extraordinarily dovish at their last meeting and this has got some people thinking we can orchestrate this perfect soft landing.

I don't want to be the bearer of bad news during the holiday I mean, this is coming up into the holiday season here but these reports are, I think, missing a lot of things that are out there.

As far as outstanding risks for the economy next year, people are getting way too optimistic about the Fed, what they can do and what's going to happen from an interest rate policy as well as from an economic standpoint. We'll continue to watch the consumer and specifically see if this filters into spending, because what will end up happening is that it's very easy to reignite inflation and if consumers are extraordinarily confident on their job prospects or the prospects for the economy, they'll go out and spend more money. And here we are again unraveling all the hard work the Fed did. So I think the Fed's going to be paying attention to a lot of these reports as well. We'll have some more information when we get the PCE deflator this week as well. That will round out this week. If you have any questions or comments, please feel free to reach out to podcast at Verdence dot com. Thank you.