Consumers are, at least, a little more confident. While the Conference Board’s consumer confidence index rose modestly to 50.2 this month, the index is still hovering near historic lows. But the good news is that while the Present Situation Index rose very slightly, the Expectations Index jumped, signaling confidence about the future.
And the University of Michigan Consumer Sentiment Index also tells us that consumers feel better about the future than they do the present. The expectations index rose while the current conditions index fell.
And it’s no wonder consumers aren’t too enthusiastic about today. While the headline unemployment rate held steady at 9.6% last month, the U6 rate (a more comprehensive measure of the jobless picture) rose to 17.1%. And 41.7% of unemployed people were jobless for at least 27 weeks. And while initial jobless claims fell to a three-month low last week, the number of people receiving extended benefits also fell…and that’s bad news.
Why? Because a recent report by CBS suggested that at least 1.5 million people have exhausted their extended jobless benefits (in July President Obama signed a bill to extend 99 weeks of unemployment insurance through November, restoring checks to 2.5 million).
And investors aren’t too confident, either: the State Street Investor Confidence Index fell 1.9 points to 86.2 for this month. More than that, confidence among investors in North America fell more than 3 points to 84.9. And to solidify their vote of no confidence, investors in developed countries continue to move into emerging markets.
Then there are businesses. No confidence there, either. According to a report by Moody’s, U.S. companies are sitting on something to the tune of $943 billion in cash, a testament to their lack of confidence in growth prospects.
But we don’t have to look at balance sheets…just ask executives. The Conference Board’s Measure of CEO Confidence fell off a cliff in the third quarter, down 12 points to a reading of 50. Particularly troubling is that the majority of business leaders are pessimistic about the short term outlook: only 22% said they expect an improvement in the economy in the next six months.
Given our outlook, for a growth opportunity for your portfolio, consider Vanguard Emerging Markets Stock ETF (NYSEARCA:VWO): this ETF offers a broad exposure to emerging market large-cap equities, and tracks the MSCI Emerging Markets Index, with top holdings in financial services, industrial materials and energy.
Disclosure: Author long VWO