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Crescenzi: Election To Boost Confidence Gauges

The nation will look ahead, as it always does, when there is a change of leadership.

The ABC News consumer sentiment survey ticked up last week after holding unchanged a week earlier. ABC's index increased to -44 from -45, moving 7 points above the all-time low of -51 set three weeks ago (dating back to December 1985). Continuing to intrigue is the divergence between the three components of the index.

Specifically, while the indexes on the consumers' sentiments toward the state of the economy and the purchasing climate are extraordinarily low, the index on personal finances is barely in negative territory. This suggests that consumer sentiment could turn quickly if the news flow does. It also helps to explain some of the resilience in consumer spending.

The index on the state of the economy was at -74 in the latest week (this and the other indexes are computed by subtracting the percentage of negative responses from the percentage of positive responses) compared to -76 a week ago and the recent low of -80, set three weeks ago. That reading was the lowest since November 1992. The index on the purchasing climate, which tends to be impacted by prices (gasoline the most prominent of late), was at -54 in the latest week, up two points from a week ago and the record low of -62 set three weeks ago.

Renewed weakness in equities prices and the continued high level of gasoline prices are likely to keep confidence low in the short-run. It is likely that as the U.S. presidential election nears the nation will begin as usual to look ahead with optimism and confidence indexes will rise. Heck, confidence indexes increased even in the early part of Jimmy Carter's administration.

The presidential inauguration in January will give another boost. Sustainability will of course be an issue. Confidence is sorely needed in the housing market--as well as income growth, so the confidence boost could be timely next year depending on other events and the condition of the economy and the financial markets.

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Although the information contained herein has been obtained from sources Miller Tabak & Co, LLC believes to be reliable, the accuracy and completeness cannot be guaranteed. This report is for information purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. At various times we may have positions in and effect transactions in securities referred to herein. Any recommendation contained in this report may not be appropriate for all investors. Additional information is available upon request.

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Tony Crescenzi
Tony Crescenzi

Tony Crescenzi is the Chief Bond Market Strategist at Miller Tabak + Co., LLC where he advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. Crescenzi makes regular appearances on financial television stations such as CNBC and Bloomberg, and is frequently quoted across the news media. He is also the co-author of the just-revised "The Money Market" and "The Strategic Bond Investor."

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