Investors Struggle With Poor Consumer Sentiment
Investors took a break on a sleepy Friday in August as consumer sentiment fell.
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A Friday in the middle of August is a good time for investors to take a break, and that is what happened to end the week. Retail sales data were solid, but consumer sentiment was poor. The University of Michigan sentiment number fell to 58.6 versus an estimate of 62, but what was worse was that long-term inflation expectations jumped to 3.9% from 3.4%.
The market held up well all week despite the CPI, PPI and inflation expectations, which were all higher than expected. The reports weren’t huge surprises and investors handled them well but they softened the positive momentum and reversed some of the rotation into the Russell 2000 that looked quite impressive early in the week.
The bears had an opportunity to press a bit, but couldn’t manage to do much. The reversal in small caps was the most significant action, but the amount of speculation that is taking place is still quite impressive. Investors are still quite positive and have an appetite for risk
Next week, there will be some housing data, but the last two weeks of August make for one of the slowest periods of the year. It is peak vacation season on Wall Street and it coincides with seasonal weakness. So far, seasonality hasn’t come into play, but there are not many catalysts on the agenda in the next couple of weeks, so it may be self-fulfilling to some degree.
The good news is that there are still some pockets of strength and some good charts as well. Not everything is wildly extended or fundamentally expensive. You have to be selective with your stock picks but there are some decent setups.
Have a great weekend. I’ll see you on Monday.
At the time of publication, DePorre had no positions in any securities mentioned.
