Must know: What are consumers saying about market expectations?

Market Realist

A must-know investor's guide to the evolving consumer health (Part 6 of 8)

(Continued from Part 5)

What is the Thompson Reuters/University of Michigan Surveys of Consumers?

The Thompson Reuters/University of Michigan Surveys of Consumers for the month of March was released on March 14, 2014.

The Thompson Reuters/University of Michigan Surveys of Consumers is based on the survey responses of 500 randomly selected individuals from across the country (excluding Alaska and Hawaii). The Survey is conducted by telephone and has about 50 questions, which are designed to measure consumer confidence in the economy. The questions cover personal finances, business conditions in the economy and future buying plans for the individuals surveyed. An increase in the reading indicates that consumer sentiment has improved, while a decrease indicates the reverse.

What did March’s survey reading indicate?

The reading for March came in at a lower-than-expected 79.6, indicating that consumer confidence was down. The reading was also lower than the 81.6 level reported in February and 81.2 level clocked in January.

What is the Bloomberg Consumer Comfort Index?

The Bloomberg Consumer Comfort Index (or CCI) reading for the week ended March 9, was released on Thursday, March 13.

A weekly release conducted by Langer Research Associates, the Bloomberg CCI is a measure of how Americans view the economy. The CCI is based on 250 random-sample telephone interviews conducted weekly. Index values are computed based on a four-week rolling average of interview responses. The survey interview seeks the views of respondents on three major issues: how Americans rate the U.S. economy, whether consumers should schedule purchases that are needed by them at the current time or postpone them, and the state of their personal finances. The proportionate number of negative views on the above issues is subtracted from the share of positive views and the result divided by three. A reading of 100 indicates that every single survey respondent had a positive view, whereas a reading of -100 indicates the opposite.

What did last week’s Index reading indicate?

Last week’s reading (for the week ended March 9) came in at -27.6, up from the -28.5 recorded the previous week, and the highest since December 22, 2013. The increase in the Bloomberg CCI indicated that consumer confidence in the U.S. had increased. Two of the three sub-indices, which measured how Americans rate the economy and buying climate increased, while the sub-index which measured how survey participants rated their personal finances, declined from the previous week.

Consumer confidence is expected to impact the retail (RTH) and automobile sectors (CARZ) as well as fixed income ETFs (TLT).

ETFs investing in the above sectors

The Market Vectors Retail ETF (RTH), tracks the Market Vectors US Listed Retail 25 Index. The Index is designed to track the overall performance of the 25 largest, publicly-listed retailers in the US. Top holdings in the ETF include Amazon.com (AMZN) (8.1%) and Wal-Mart Stores Inc. (WMT) (8.04%).

The First Trust NASDAQ Global Auto Index Fund (CARZ), tracks the NASDAQ OMX Global Auto Index, which is a modified market-cap weighted index, tracking the performance of publicly-listed and highly liquid auto companies. Top ten holdings in CARZ include Ford (F) and General Motors (GM).

The iShares 7-10 Year Treasury Bond ETF (IEF) tracks the Barclays Capital U.S. 7-10 Year Treasury Bond Index. The index measures the performance of U.S. Treasury securities that have a remaining maturity of at least seven years and less than 10 years.

The iShares 20+ Year Treasury Bond (TLT) ETF tracks The Barclays Capital U.S. 20+ Year Treasury Bond Index which measures the performance of U.S. Treasury securities that have a remaining maturity of at least 20 years.

The Core Total U.S. Bond Market ETF (AGG) tracks the Barclays U.S. Aggregate Bond Index. The Index measures the performance of the U.S. investment grade bond market. The index invests in a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States – including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities, all with maturities of more than 1 year.

Read about how consumer confidence is expected to impact the retail (RTH) and automobile (CARZ) sectors, as well as fixed income ETFs like TLT, AGG, and IEF in Part 7 of this series.

Continue to Part 7

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