U.S. and Global Confidence are in Divergence - So Are Stock Markets

By: Sy_Harding

It’s not a secret. Investor sentiment in the U.S. is at very high levels of bullishness and confidence.

However, the ZEW Center for European Economic Research reported this week that its investor confidence index fell from 8.6 in August to 6.9 in September. It has fallen for nine straight months.

U.S. consumers are also confident. The University of Michigan/Thomson Reuters Consumer Sentiment Index rose from 82.5 in August to 84.6 in September. That’s its highest level since July 2013.

However, the European DG ECFIN consumer confidence indicator in the euro-zone continued its decline, dropping from -10.0 in August to -11.4 in September.

The divergence also shows up in global stock markets.

The Dow & S&P 500 remain less than 2% from their record highs.

However, global markets outside the U.S. are nowhere near as sanguine.

While the Dow, S&P 500, and Nasdaq remain well above their 200-day moving averages, many global markets have corrected down to that often important long-term support level, and saw it fail to hold.

And it is not just the markets of the Europe.

A question that comes to mind is whether investor and consumer confidence are leading or lagging indicators for markets. European confidence indexes were much higher when their markets were making new highs, but have been plunging as their markets tumbled.

It may be like boxer Mike Tyson said, “Everyone is confident and has a plan until they take a punch”.

If it is a global economy, and it is, confident U.S. investors may want to think about that and whether the U.S. market can avoid taking a punch, when so many of America’s major trading partners are seeing their economies and markets in trouble.

Sy Harding is president of Asset Management Research Corp., and editor of the free market blog Street Smart Post.

© 2014 Copyright Sy Harding- All Rights Reserved

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