A striking gap in confidence has opened between financial advisors and U.S. consumers, and economic data released Tuesday spells out how far that distance has grown over the last month.
Advisor confidence in the U.S. economy and the stock market rallied in September, climbing to its highest level in the last six months, according to the Rydex|SGI AdvisorBenchmarking survey. The advisor confidence index was 109.08 in September, up approximately 16% from its 16-month low of 93.8 in August.
However, the Conference Board's consumer index for September dropped precipitously to 48.5 in September–its lowest level since February–compared to a revised 53.2 in August from an original reading of 53.5. The headline number was well below economists' expectations for a reading of 52.5. Forecasts ranged from 48.0 to 55.0, according to a Thomson-Reuters poll.
The confidence gap has arisen due to the difference between what market players are experiencing in global activity versus U.S. consumers' struggle to regain the financial ground they lost in the 2008-9 recession. While economists and analysts see a modest recovery, consumers see weak job growth and deteriorating business conditions.
'The Consumer Always Lags a Bit'
"The consumer always lags a bit in finding out that the economy is heading into a soft spot, and the consumer lags when there's better news around the corner," said Jim Kelleher, director of research for New York-based equities research firm Argus Research.
"The market has been fairly good in September, and that is consistent with the market's longstanding ability to climb a so-called 'wall of worry,'" Kelleher added. "This summer was characterized by lots of talk: double-dip
recession and possible deflation. At the same time, on a global basis, U.S. consumers may have been unaware of some very encouraging demand trends and signs of economic recovery, particularly in the growth economies overseas."
