It’s easy to get anxious reading the news. Rising interest rates, talk of trade wars, inflation fears, political events, and international developments all can influence stock prices and in return, lower consumers' confidence in the market. Consumer sentiment is a key indicator of the overall health of the economy. These types of surveys measure how optimistic consumers feel about their finances. When people feel confident about the stability of their incomes it influences their spending and saving activities.
A recent study of consumer sentiment from the Russell Investment group[1], indicated a low level of confidence. When consumers aren't confident, they tend to save rather than spend, which restricts economic growth. During turbulent times, some investors pull money out of the market, but this tends to lead to a “buy” high and “sell” low approach.
The graph below shows the fluctuations in the CSI since 1952 and there are seven low points we identified.
The low points for CSI from the chart above and the corresponding S&P market data are plotted in the table below. If you compare the S&P returns one year after the low point in the CSI you will find the market increased by double digits every single time since 1975.
see chart: [2]
S&P at start | 1 yr later | 1 yr return | |
Feb '74 | 93.45 | 80.1 | -14.3% |
May '75 | 90.1 | 101.2 | 12.3% |
May '80 | 107.7 | 131.7 | 22.3% |
Nov '90 | 315.29 | 385.92 | 22.4% |
Nov '08 | 883.04 | 1088.07 | 23.2% |
Aug '11 | 1185.31 | 1403.45 | 18.4% |
Feb '22 | 4587.18 | ??? |
While past events do not guarantee future results, continuing to invest when the market is down has historically paid off. In just the past 2 weeks, the S&P 500 has risen 6% from its recent low.
Keeping it all in perspective can be tough at times, but this is one of the many reasons you aren’t going it alone. When times seem turbulent, it’s good to have someone to reach out to who can help you keep that big picture in mind. Do not hesitate to give us a call if you’re feeling that turbulence; we’d be happy to check in with you and help you keep your focus.
Our Advice is Your Advantage.
Standard & Poor's is a corporation that rates stocks and corporate and municipal bonds according to risk profiles. The S&P 500 is an index of 500 major, large-cap U.S. corporations. You cannot invest directly in an index.
[1]https://russellinvestments.com/US/Resources/Financial-professionals/Economic-Indicators-Dashboard/ConsumerSentiment
[2] https://www.multpl.com/s-p-500-historical-prices/table/by-month