Market Musings 2/25/2025
Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!
Markets tumble as consumer spending fears gain more traction
The S&P 500 has fallen over -3% the past 4 market days as #ConsumerConfidence fears fester. It started with Walmart’s weak retail sales outlook for the year on Thursday. Then, began to snowball with Friday’s weak Consumer Sentiment Index data and today’s Consumer Confidence Index.
Consumer Sentiment? Consumer Confidence? Both are essentially surveys conducted to gauge the how consumers feel about the economy and their financial situation. The Consumer Sentiment Index is conducted by the University of Michigan and the Consumer Confidence Index by the The Conference Board, a non-profit think tank.
The Consumer Sentiment Index dropped first last Friday with the overall index falling pretty significantly by about -5% from January. This surprised investors not really expecting any change in #ConsumerConfidence.
Then, today’s Consumer Confidence Index showed a -7% drop from January. It was actually only expected to be down -3% which likely means forecasters thought Friday’s #ConsumerConfidence data skewed a little too pessimistic, but it came in even worse…
Markets quickly pulled back from all-time highs last Wednesday.
So why is this important for stocks? Well, consumer spending drives a large part of the economy.
As we previously mentioned, #ConsumerConfidence have been incredibly resilient despite surging #Inflation. Consumers have been coping using savings and credit debt, but needs some relief to continue.
Of note from the recent consumer data, consumer expectations for future #Inflation has spiked in the past month and likely a large factor in the deteriorating #ConsumerConfidence.
Remember, this is just survey data not quantitative results and may be more emotionally bias. However, regardless of the accuracy of the expectations, #ConsumerConfidence is still likely to play a role in a household’s spending plans. That’s what’s concerning for markets.
Investors have been banking on a #Goldilocks soft economic landing－meaning the high interest rates slows down the economy enough to curb #Inflation, but with enough time to reset back to balance with #RateCuts before the #LaborMarkets collapses and we slow down way too much.
If #ConsumerConfidence erodes and spending pulls back just as sharply, that could end up tipping the US into a #Recession.
No Ursa account yet? Download Ursa here!
As of the publish date, Ursa portfolios do not own Walmart with no plans to open any new positions in the next 5 days.
The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.
Original Photo by Pixabay.