Consumer confidence trends have turned negative as the Delta variant has spread. The Conference Board's Consumer Confidence Index fell to a six-month low in August. The index was 133 in February 2020 but plunged to 92.6 in May and to 84.8 in August. As the nation moved toward a higher vaccination rate, the index stood at 129 in July 2021 but fell to 113.8 in August as COVID cases surged. Meanwhile, the University of Michigan reported that its Consumer Sentiment Index was 70.3 in August 2021, down from an 85.5 reading in June. It's worth looking at the experience during the financial crisis in 2007-2009. In 2007, confidence peaked at 112 in November before falling consistently over the next year to a low of 25 in February 2009, as the bear market was bottoming. The index did not reclaim prior highs for another eight years. Currently, the recovery has been quicker, though the durability of the consumer turnaround will depend on improvements in health, the effectiveness of government stimulus, and behavioral changes from the population post-pandemic. From an investment standpoint, we have found that the bottom of the confidence cycle -- when everybody has given up -- has been a good time to buy stocks. In other words, confidence is often a contrarian indicator.
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