Chart of the Day: Consumer Sentiment Hits 28 Year Lows

Markets opened strong, then rolled over and went negative.

If you were a pure contrarian, you would think that sentiment readings were a good — albeit historically early — buying signal. The last time we were this negative was in 1980, and  we were pretty close in 1990-91.

I take that as signal to look for what can be described as a low risk, high return buying  entry point some time over the next two years.


Source: Haver Analytics, Merrill Lynch (June 13, 2008)


This does not mean there won’t be moves up and down between now and then, or there won’t be other buying opportunities over the next 24 months.

However, if you are looking for a 1980 type of a start of the new Bull Market, sentiment is suggesting we could see one in that time frame.


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What's been said:

Discussions found on the web:
  1. lithuania commented on Jun 17

    Did you mean the 1980’s bull market? If not, wasn’t the take-off point in August 1982?

  2. Robert commented on Jun 17

    wish you were around in the 1973-1974 period…..a full 8 years after the 1966 top, the market was drip drip drip down….until trading almost stopped in Dec 1974.
    But then there was just the Wall St Journal, the Dow Jones Newswire and Business Week and a few analysts who had not been fired in the 1970 paper crunch. Think of it: between 1966 and 1982, the market went back and forth from roughly 500 to 1000.
    Now every really smart person from Harvard to the local high school is in the market. The market will fool them all. It will find a level, but believe me, it will not be an easy place to spot. Keep your powder dry, fellow investors, or the saw-tooth nature of he past year will get you. Why is the oil trading floor so empty? Maybe, just maybe, in this greatest bull market, the really smart guys were shorting and losing all their money. Mow they have to get a real job…and there are none.


    BR: Have a look at the various rallies that took place between 1966 – 82. Wild!

  3. wally commented on Jun 17

    No hurry. You have years to make the decisions… the bargains are not there yet, just the consumer sentiment.

  4. KJ Foehr commented on Jun 17

    Yes, it is a very good bet that the stock market will bottom in the next two years. But will it bottom at 20% off the Oct. highs or 40% or even worse? That is the operative question…

  5. Chief Tomahawk commented on Jun 17

    When consumer sentiment is this low and the value menu at McDonald’s has yet to budge to reflect inflation, I think consumer sentiment is a ways yet from a bottom.

  6. michael schumacher commented on Jun 17

    I am surprised (actually not really) that this as well as the PPI (currently at demand destruction levels) have not had much mention at all today. Much like the U of Mich. sentiment from last friday……

    “the king hears ONLY what the king hears.”

    Goes the mantra on any bad news.


  7. JIm Haygood commented on Jun 17

    Depressed consumer sentiment definitely implies a buying point ahead. What’s missing is attractive valuations. A nice 30% drop would fix that in a hurry.

    Such an event would prompt the definitive magazine cover … something like “FROM BUBBLE TO BUZZARDS: ARE WE ROADKILL?” And then I’ll sit on the buy order ‘enter’ key, whilst pumping the air with both fists like that clown on TV and shouting … well, you know the word.

  8. Pat commented on Jun 17

    Could this be reflective of the public “holding their breathe” until the next president?

  9. The Financial Philosopher commented on Jun 17

    I believe Barry is simply recognizing that the current environment is beginning to look promising for those of us who manage assets and practice risk management as opposed to market timing.

    With perceived risk increasing, real risk is decreasing. We saw the opposite environment in 2006 and 2007.

    Calling the top or bottom is a fool’s game while a clear perspective on perception can be the tool of a risk manager…

    “Perception is strong and sight weak. In strategy it is important to see distant things as if they were close and to take a distanced view of close things.” ~ Miyamoto Musashi

    Cheers to all…

  10. Vermont Trader commented on Jun 17

    Well I think the shit is just about to hit the fan.

    You guys have fun over the next 2 years but I try and make money every single day.

  11. ottnott commented on Jun 17

    I’d be curious to see what interest rates were at the 1980 and 1990 lows in sentiment.

    I think the turnaround will be much tougher and slower this time. We’ve already had interest rates brought down to very low levels, the Federal government is spending like crazy, and people have tapped out their credit. The quick fixes are used up.

    I suppose oil could drop $50/bbl, but $85/bbl oil isn’t fuel for a boom.

  12. Barry Ritholtz commented on Jun 17

    In 1980 the Prime rate was 20%

    In 1990 it was 10%

    Today, it is near 5%.

  13. Gloomy commented on Jun 17

    I love your work. But understand something. We are not in Mediocristan anymore, we are in Extremistan. Think these are low consumer sentiment numbers? You ain’t seen nothin’ yet!!

  14. Dan commented on Jun 17

    The trend is your friend.

  15. Paul in NYC commented on Jun 17

    In 1980 and 1990 I believe people actually had money (savings) to borrow against. Today the negative personal savings rate would seem to make that harder. Especially with newly tightened lending practices.

  16. igorsway commented on Jun 17

    The market high was only last year. I’d give it another year before we hit bottom.

  17. Andy Tabbo commented on Jun 17

    Not really going out on limb suggesting sometime in the next two years will be a good buying opportunity.

    I think it will take two more years to put in a bottom. What’s interesting to observe about that consumer index chart is how high consumer sentiment was in the late 90s. It took a few more years after that euphoric peak to finally put in a top. It will take a few years to put in a bottom.

    In terms of longer term Elliot Wave analysis, the time target for a bottom is May 2010. Unfortunately, the price target is about 800 for the S&P to get close to the 2002 lows. When we look about the first decade of the century, we will see a massive consolidative channel.

    – AT

  18. cinefoz commented on Jun 17

    Ordinarily, I would agree that being a bottom feeder is a great way to make money in the market. In the past, I would look at the kind of market we have today and consider it as a gift. The high cost of oil makes this market suck dog dick. I can’t read it a bit. I just know that oil at this price is not a positive leading indicator.

    If I ‘knew’ that oil would return to proper levels soon, I would buy up. With Congress doing little and regulators doing nothing, oil is certain to remain high for an unpredictable length of time.

    Lots of sectors look like they are bottoming. I’m not sure if I have the guts to jump in, or should I wait for the next leg down.

  19. Mike M commented on Jun 17

    Does any look at valuations anymore? Trailing earnings are over 20. It’s worse if backing out elevated profit margins. This is the launching pad of a secular bull? Sheesh! Why is everything now sentiment and technical indicators?

  20. scorpio commented on Jun 17

    people are always saying the end is nigh. this time, it really is.

  21. Tom commented on Jun 17


    It would be interesting to overlay the consumer sentiment with S&P500 data- there is likely a lag of 6-18 months.


  22. DL commented on Jun 17

    There’s also the election year cycle to consider. If Obama is smart, he’ll tell the Fed to get the “dirty work” out of the way during the first two years of his term, paving the way for a bull market during the last two years of his term. My guess is that 2011-2012 will be pretty good for the stock market.

  23. name commented on Jun 17

    So scorpio, you’re saying that this time is different?

  24. Chris commented on Jun 17

    The MAJOR difference between now and 1980 & 1990 sentiment lows…is that we have yet to see MAJOR CAPITULATION LOWS to go along with sentiment lows. The US retail investor, with the great majority of its stock holders now fast approaching retirement age (see baby boomers and Japan 1990 for details) have been rewarded by “hanging on” and not selling (capitulating)….

    Watch for a major “capitulatory” event (sell-off or crash) coupled with the continued low consumer sentiment before hopping on the 1980 & 1990 bull market turn, IMHO.

  25. i’m just sayin’ commented on Jun 17

    Consumer sentiment may also be affected by homeowners who used HELOC to fund small businesses/freelancing careers.

    Surprised that there isn’t much survey data re. impact of HELOC on small business creation/destruction.

    I have lots of anecdotal stories of acquaintances tapping HELOC to fund expansion/start-up c. 2004-2006.

  26. jombi commented on Jun 17

    I have a nice one for you all. Just wrote it up :

    ike a tidal wave, it came. Spiraling chaotically, but at the center calmly the same. The great giants stood their ground amongst the hill tops for all to see and for a while they would remain… But it came to be that they failed to tame this balancing force. It came to be that in the end nature took its course. It exponentially unfolded from these high heights exposing the insignificance of man’s greatest mights. And it came to be that balance was restored. And it came to be that nature simply would not be ignored.
    – Jombi 6/16/08

  27. David Henne commented on Jun 17

    “It’s different this time” is never true until the day you die. All great empires of the past have eventually collapsed into strategic irrelevance due to owing more debt than they could service, brought on by overspending and overborrowing. In that respect, it’s not different this time, either.

  28. rickrude commented on Jun 17

    hey guys cheer up.
    My sentiment is very, very positive, I have
    a smile on my face paying the outrageous
    pump prices.

    Great to be a bull in the energy stocks.
    Another big day today.

  29. kett82 commented on Jun 17

    I see dead people?

  30. bastiat commented on Jun 17

    “Watch for a major “capitulatory” event (sell-off or crash) coupled with the continued low consumer sentiment”

    It seems like it may have already happened, it’s just in another country.
    Shanghai Composite

    Now that’s a bear market.

  31. winslow commented on Jun 18

    Maybe Bush is smarter than we give him credit….he is leaving a huge mess for Obama…then all can say it is Obama’s fault

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