Consumer Confidence Hits COVID Era Lows, Addressing Anthropic's "Risk to Humanity"

SPEAKER_1 (0:00)

That's the state of play. Let's get out to KG who joins me now, because we've been waiting for some of this data to hit the tape. Kevin, we've got September Conference Board Consumer Confidence.

We're watching the sentiment indicators very closely because of what happened in these markets off the back of Umish's survey. What are you seeing this morning?

Kevin Green (0:21)

We are seeing actually a pretty dramatic drop to the downside for Consumer Conference from the Conference Board, as we talked about. This is the September reading, and that actually came in at 81.9. The street was looking for 89.2, and we did get a revision for last month, dropping down to 88.6. That's from 89.4. So we are seeing a drop. The site is still updating, so we haven't gotten the full details yet here. Actually, the Consumer Expectations Index did fall by 5.9 points, so we do have some of the data right now. This is one of the larger drops that we've seen in a very long time. In fact, if we look at the Consumer Confidence, we are actually pretty much testing and actually exceeded the COVID-19 lows when it comes to Consumer Confidence. So this is actually a pretty big deal here, Sam, as we do get this data rolling in. Present Situation Index, that also is rolling over to the downside, not as bad as we have seen in 2020, but once again, kind of moving a little bit lower here. A lot of concerns when it comes to the economy. We have net views on current business conditions. They say that they're staying good versus bad. That actually declined by 3.4%. So you're starting to get a little bit of a change when it comes to current business conditions as well. Current employment conditions also soften within the month as well. So we are seeing some weakness when it comes to consumer. This kind of matches the other consumer sentiment data that we've seen over the last week, as well as the University of Michigan sentiment data set that we have seen as well. So you would actually think that we would kind of bounce back a little bit higher on the back of this news because usually lower consumer confidence or even consumer sentiment for that matter kind of front runs consumer spending, which is also an input when it comes to inflation. But the market's kind of still digesting a lot of this data.

SPEAKER_1 (2:07)

Yeah, for sure. OK, so we've deteriorated notably in September, according to the chief economist over at the conference board. So obviously we're seeing the present situation index falling sharply. I mean, just walk us through the market reaction. You know, you're looking at the one-minute tick chart on VIX because of course the reaction has been pretty interesting to some of the other sentiment indicators. But I'm also just wondering what you make of the divergence we're starting to see between the resilience in this economy and how consumers are feeling about everything.

Kevin Green (2:38)

Well, we know that this is a K-shaped economy. So when we have this sentiment data set, you're kind of getting a broader swath of the those that participate, but those that actually have dollars like the enterprises and some of the wealthier individuals out here, they're still very resilient and they continue to spend in certain pockets of the market. Then their investment, especially when you're looking at equities, continues to provide them with positive cash flow, if you will, because equities obviously is still trading near all-time highs. So this is that K-shaped economy. I'm looking at volatility only because volatility is still relatively low. We're only sitting at a 16 VIX right now. We're implying about a 1 percent move. When you're looking at credit spreads themselves, they continue to move to the upside here. That's where I'm finding the major divergence that usually doesn't last this long. One day, two days, even three days, you can see a divergence. We are pretty much sitting at about a week and a half or so where yield markets, credit spreads move in higher, higher volatility in those markets, equity fall relatively low. Once again, looking at this dataset, you would think that the market would pump this up here a little bit as well.

Just given the fact that once again, consumer confidence, consumer spending is really tied to the inflationary picture as well, all else being equal. So an interesting reaction or a non-reaction from the equity market, at least for now, we also have some of that Jolts data coming out too that may add a little bit of the fuel to this fire as well.

SPEAKER_1 (4:00)