That’s right, we are back to sentiment malaise levels pre-Reagan.
Peter Boockvar of Miller Tabak notes:
April preliminary U of Michigan confidence # fell to 59.5, the lowest since June
1980. Present conditions fell to 71.7 from 77 and the Outlook fell to 51.7 from
53.3. One year inflation expectations rose to 5.2% from 4.8%, the highest since
1982. Message to the Fed, inflation expectations are not ‘well anchored’ and
price stability is in danger the longer people believe inflation is going higher
as it feeds on itself.
The key though is whether employees start asking for
raises to deal with higher prices (fed the inflation in the ’70s) but with a
softening labor market, their leverage is limited thus furthering the pressure
on after inflation wages. The implied inflation rate in the 10 yr TIPS is at
2.471%, a touch less than 2 month highs reached on Wednesday of
Does the freefall in consumer sentiment suggest anything in terms of our earlier question: Are we in a recession or not? What might that mean in terms of economic activity in the near future?
Good stuff — thanks Mike.