Consumer Confidence and Dollar Plunge; Oil Prices Soar

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Includes: DIA, QQQ, SPY, UDN, UUP
by: Emerginvest

Typically Emerginvest stays away from currency levels, however Wednesday merits a special mention. According to an article from Reuters.com entitled: "RPT-Global Markets – Dollar Plunges, oil surges, rate cut expected,

The U.S. dollar plunged on Wednesday as it headed toward its biggest one-day decline against major currencies in 13 years.

The repercussions were severe, sending oil prices soaring.

Furthermore, an article from Schaeffers Research entitled: "Midday Market Update: After 2 Days in the Red, U.S. Stocks Find Positive Territory," reported that:

This morning, the Conference Board reported that U.S. consumer confidence fell to the lowest level on record during October. Specifically, the index decreased to 38. Economists were expecting the index to drop to 52. September's reading was revised up to 61.4, from an originally reported 59.8. David Gaffen of the Wall Street Journal wrote in his Marketbeat blog, 'That's an all-time low for this index and represents a severe decline in consumer expectations, and it comes on the back of extended turmoil in the markets and in the financial system.'

I don't think it's a shock to anyone that consumer confidence fell drastically. However, it clearly surprised some members to see it fall to 38 – and it speaks for itself that it was at the lowest levels since it was created.

Look at what has happened in the last few months. Markets across the world have shed well over 10-30% of their value in the last few weeks (the Emerginvest World Heat Map is dark red looking at the last quarter). Market volatility has transformed what were once headline-earning drops or surges into the market as commonplace, daily occurrences. Major banks around the world have collapsed and those still standing require massive capital injections from governments. Investors have seen their portfolios drop by 30-40% and feel like they have nowhere to put it. Even T-bills were trading at negative values (i.e. investors were paying the government to keep their money safe).

Obviously it's no surprise that consumer confidence has fallen as much as it has – but it certainly does paint an extremely negative picture of the next year or so.