Consumers were more optimistic. Investors were less so.
As we neared the end of 2024, U.S. consumers were feeling optimistic. Every month the University of Michigan Survey of Consumers conducts about 600 interviews with American households, asking interviewees about their personal finances, business conditions, and buying conditions.
In December 2024, the Index of Consumer Sentiment was up 3.1 percent month to month, and 6.2 percent year to year. Consumer sentiment rose “for the fifth consecutive month…reaching its highest value since April 2024. Buying conditions exhibited a particularly strong 32 [percent] improvement, primarily due to a surge in consumers expecting future price increases for large purchases…Broadly speaking, consumers believe that the economy has improved considerably as inflation has slowed, but they do not feel that they are thriving; sentiment is currently about midway between the all-time low reached in June 2022 and pre-pandemic readings,” reported survey Director Joanne Hsu.
Individual investors, on the other hand, were feeling less bullish than they did earlier in the month. The AAII Investor Sentiment Survey found that investors’ outlook shifted in December. Investors became more uncertain, and a higher percentage reported feeling bearish.
Investor sentiment is often considered to be a contrarian indicator. The AAII website explained, “Although investors would like to imagine that their decisions are rational, most have bought at near-highs due to fear of losing out on gains and sold at near-lows due to fear of further losses. This herd behavior is called market sentiment; when market sentiment is low, the majority believes the market will fall, while high market sentiment means that the majority feels the market will rise in value. However, more often than not, the market will move against the sentiment of the majority. Therefore, many professional money managers use market sentiment as a contrarian indicator, buying when sentiment is pessimistic and selling when sentiment is optimistic.”
Last week, major U.S. stock indices finished higher, and yields on longer maturities of U.S. Treasuries rose. The benchmark 10-year U.S. Treasury yielded 4.62 percent at the end of the day on Friday.
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
IDIOMS DON’T SAY WHAT THEY MEAN…If you’ve ever “cried wolf,” “gone the extra mile,” or “had butterflies in your stomach,” then you’re familiar with idioms—phrases that don’t mean what they say. They’re used to “add color” to communications, making what’s said or written more memorable. The English language has a lot of idioms about money. Test your knowledge of money idioms by taking this quiz.
1 Someone says, “You can take it to the bank.” What they mean is you should:
A - Make a deposit.
B - Proceed with caution, it may be a scam
C - Believe a statement is true and accurate
D - Understand that a venture will generate a lot of money
2 If someone is ‘living on a shoestring,” they have a very limited budget. Which of the following may explain how the saying originated?
A - Shoestrings are thin and break easily
B - Peddlers once made a living by traveling town to town selling shoelaces
C - British prisoners would lower a shoe by its laces through cell windows hoping someone would give them money
D - All of the above
3 If you believe that a new product or service will do well you might say it will:
A - Break the bank
B - Put cash on the barrelhead
C - Sell like hotcakes
D - Hop on the gravy train
4 When people offer aid to a person or group in need, they are:
A - Striking while the iron is hot
B - Following the herd
C - Playing the long game
D - Offering a helping hand
Weekly Focus – Think About It
“When we love, we always strive to become better than we are. When we strive to become better than we are, everything around us becomes better too.”
