“We locked down the economy for 18 months, spent ~$14 trillion, and now my margarita costs 30% more.” – Cullen Roche, author & investor.
We follow the relationship between consumer sentiment and future stock returns. Evidence would suggest that when people feel the worst about future stock returns, markets tend to do well. Conversely, when people feel best about future stock returns, markets tend to do poorly.
We wrote about the inverse relationship in a prior post “Predicting Irrational Beasts.”
I was enamored when a respected investor posted the following on Twitter…
Source: Cullen Roche, Twitter
A quick & rough overview of where we are at…
Stock prices – sniffing all-time highs (ATH)
Digital assets – i.e. Bitcoin, Ethereum, etc. – not at ATHs as of this writing, but having a great year
Real estate – low rates and appreciating prices across the country
Household net worth – the above have boosted retirement/digital asset balances, and home equity
Jobs – it’s a job seekers market right now… companies cannot find enough workers and are bumping up compensation
Corporate profits – Q3 reporting wrapped up with companies recording blowout earnings
So why does everyone feel like &%^#?
We take up Cullen on offering our opinion on why we are hovering around ATHs, yet people aren’t feeling it…
*This is just my opinion, you might disagree and that’s ok.*
The gap between the haves and have nots has probably gotten wider. Low rates, appreciating stock prices, and ascending home prices, benefit those who own those assets and have access to capital, which is usually the well-off.
Those working in retail, hospitality, travel, and restaurant & bar industries have been hit particularly hard.
Stress of the Pandemic
Whatever you believe about COVID, vaccines, and the government’s response, know that the stress on parents, kids, families, and households is real. Things like finding childcare, working from home, kids being out of school, finding work/life balance, are much more challenging during a pandemic.
Heck, even getting a standard cold is a pain nowadays.
People really don’t like paying $5 for something that used to cost $4.
With everything so political, one side is always going to be miserable. Often times, the miserable side is going to be the most vocal.
See the previous point. Give everyone a microphone and all hell can break loose. The internet and social media’s impact on our mental health is still an experiment, but early returns are not good.
If you’re looking for something to watch, check out the Social Dilemma on Netflix.
Certainty of Impending Doom
This is arguably the most unloved bull market in history. There’s a segment of the investing public that has been calling for a catastrophic drop year after year.
We wrote about the human love affair with pessimism here.
What say you? Let us know your thoughts on why everything is at ATHs, but nobody is happy.
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