Investors Cautious on Equities Despite Low Unemployment, Strong Growth

Investors Cautious on Equities Despite Low Unemployment, Strong Growth

Investors Cautious on Equities Despite Low Unemployment, Strong Growth

Americans were less upbeat about stock even as the US unemployment rate hovered near an 18-year low and the economy recorded its fastest growth pace in four years in the second quarter, a New York Fed survey released Monday revealed.

The regional Fed’s barometer on consumers’ perceived chances of US stock prices increasing in 12 months fell to 40.3% in July, which is the lowest level since October 2016 when it was 37.64%.

Their view on stocks softened despite the benchmark S&P 500 index marking 3.6% in total return last month on strong company earnings and solid economic data.

In general, US consumers the survey said were less optimistic about household finances a year from now.

“One-year-ahead expectations of changes in the household’s financial situation deteriorated slightly and are now comparable to the values in July 2017,” the NY Fed wrote on the latest survey results.

While consumers believed household income would grow, their expectations for more family spending fell to 3.2% in July. They expected home prices, gasoline and medical costs to soften, while they reckoned food prices would rise.

It is unclear what caused consumers to turn less confident about their finances.

They maintained a solid view on the jobs market, although they downgraded the prospects for paycheck growth to 2.4% from 2.7%.

The survey’s gauge on expectations for taxes grew for a 5th month running, to 2.2% since it hit a series low of 1.5% in February.

Last December, Washington enacted the biggest rewrite of the federal tax code in 30 years which included a massive tax cut.

The tax overhaul has resulted in a surging federal debt load to finance the government’s budget gap.

Consumer expectations for government debt growth increased to 6.9% in July from 6.6% in June and compared with 4.9% from a year ago.

The New York Fed survey is done by a 3rd party that taps a rotating panel of about 1,200 heads of households.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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