As the below chart details, consumer confidence tends to lag the stock market by about 2-3 months.
So what has occurred since January that could be impacting the market in a negative way? I can list a large number of factors, but a few are:
- unresolved financial industry crisis
- uncertainty about higher taxes. Increasing the bracket rate is one thing, but the uncertainty about the monetary impact on taxpayers with the phase out of mortgage deduction, phase out of deductibility of charitable contributions, etc.
- significant increases in government spending on health care
- cap and trade tax
- foreign profits tax
- potential tax on security trades.
As Jim Cramer noted in his article on his site MainStreet, Cramer Takes on the White House, Frank Rich and Jon Stewart:
When I somewhat obviously and empirically judged that the populist Obama administration is exacerbating the crisis with its budget and policies, as evidenced by the incredible decline in the averages since his inauguration, I was met immediately with condescension and ridicule rather than constructive debate or even just benign dismissal. I said to myself, "What the heck? Are they really that blind to the Great Wealth Destruction they are causing with their decisions to demonize the bankers, raise taxes for the wealthy, advocate draconian cap-and-trade policies and upend the health care system? Do they really believe that only the rich own stocks? What do they think we have our retirement accounts in, CDs? Where did they think that the money saved for college went, our mattresses? Do they think the great middle class banks at the First National Bank of Sealy and only the wealthiest traffic in the Standard & Poor's 500?"
The current administration should take a look at events that have unfolded this year, many policy driven, and reevaluate the timing of these programs before it is too late economically.