Don’t live by feelings.
Don’t invest by them either.
One way the attitudes of consumers toward the economy are measured is through a monthly telephone survey done by the University of Michigan called the Consumer Sentiment Index. According to Investopedia, this measurement assesses “how consumers feel about the economy, personal finances, business conditions, and buying conditions.”1
In the chart above, JP Morgan Asset Management reveals something counterintuitive about this survey and its relationship with the stock market: when many people have felt worst about the economy, the stock market has performed much better over the following year than when people have felt best about the economy.
This is a good reminder that you should not let your feelings (or, more precisely, other people’s) dictate your investment decisions.
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Sources:
- Adam Hayes on October 20, 2023, “Michigan Consumer Sentiment Index (MCSI): What it Means, Uses”. Accessed online: Michigan Consumer Sentiment Index (MCSI): What it Means, Uses
- “Guide to the Markets”, August 31, 2024, page 22. https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/?gad_source=1&gclid=CjwKCAjwreW2BhBhEiwAavLwfItnclTgBKKxVWUhVsy2dvwmC9c7NylVsyw86gclzLGKoo-tWmcggBoC-BwQAvD_BwE&gclsrc=aw.ds