The University of Michigan consumer sentiment data for January was revised lower this morning, from 73.2 to 71.1. Well below the historical average of 84.7 (orange line), now for the 43rd straight month and below last month's reading of 74 as well. This was the first monthly decline in sentiment after five straight months of gains.
Concerns about future employment arose; with the number of respondents expecting unemployment to rise in 2025, reaching the highest level since the pandemic.
Although weekly initial jobless claims remain low, rotating between the 200K and 250K range for the last 4 years.
While the total number of continuing unemployment claims also remains low. Both data points aren’t showing signs of stress just yet, although other data points are showing a slowdown in the pace of hiring.
Inflation expectations over the short term jumped to 3.3%, which is an 8-month high and the second straight monthly increase. Long-term inflation expectations also rose to 3.2% in January.
Respondents cited future policy changes on tariffs as the main reason behind their expectations. Expressing intentions to buy certain big-ticket items sooner rather than later, to avoid paying potentially higher prices.
Bear in mind that sentiment can be fickle.
Let’s do a quick run-through of some charts to end the week. With yesterday's late-day rally to new highs in the S&P 500, the major market average has now matched the size of the 2020-2022 bull market in points at 6115.
While we’ve had some relief in interest rates as the 10-year has stayed below last years high after briefly exceeding that level for a few days.
The US dollar has now broken below the last major swing low and looks set to pull back to the $106 area. The pause in interest rates and the USD has been a welcome relief to financial conditions.
None more evident than in the total international stock funds (VXUS), which is actually outperforming the S&P 500 so far this year. VXUS is up 4.2% while SPY is up 3.72%.