Dow futures are up 80 points, indicating a strong start to the trading day. At the same time, the S&P Futures increased by 3 points as investors demonstrated some level of cautious enthusiasm. The Nasdaq Futures were down just 6 points, suggesting a bit of caution in the most tech-heavy of indexes. On the flip side, the widely watched Russell 2000 small cap index jumped 5 points as small-cap stocks showed a lot of strength. With rising economic indicators and data indicating rising consumer confidence, the trajectory of our economic future could be very complicated. These movements are born within this difficult landscape.
With COVID-19 came tremendous uncertainty, and in March, the Conference Board’s Consumer Confidence Index sunk to 92.9. This unprecedented drop has raised alarm about consumer attitude. The Expectations Index, a sub-index of the Consumer Confidence Index, is lighting up recession warning signals. With each month, consumers are becoming increasingly more pessimistic about future economic conditions. They are particularly focused on the current and future jobs, income, and economic development. Taken together, this data points to an overall climate of caution that may be causing delay or suspending crucial spending and investment decisions.
Consumers remain pessimistic. On the surface, durable goods orders seemed to clear my negative storm clouds with a surprise increase of 0.9% m/m in February. Analysts were looking for a 1% decrease, but the 0.3% increase in the face of expectations shows that there is some kind of underlying strength in the manufacturing sector. New orders for manufactured durable goods point to continued resilience and promise further economic growth, despite consumer fears.
Core Services ex-Shelter Inflation gauges are the current inflation yardstick of choice among market watchers. They predict Personal Consumption Expenditures (PCE) index will be flat, month-over-month and year-over-year. The Federal Reserve’s preferred measure of inflation, the PCE index, is a key standard by which this administration and the Fed will be judged on monetary policy austerity. Some stability in this index would be welcome news indeed and could help reassure policymakers at a time when other economic indicators remain volatile.
Moreover, the most recent GDP numbers officially clocked in an annual growth rate of +2.3%, with Personal Consumption unshaken at +4.2%. An unusually murky Initial Claims for Joblessness at 225,000 provides one of the most useful short-term indicators of labor market clarity. These figures point to a sounder macroeconomic picture in general, although there are still possible headwinds.
The VIX index, a measure long considered the best gauge of anxiety on Wall Street, is a sign that fear and uncertainty have taken hold of financial markets. As investors continue to parse complex and often contradictory signals from a range of economic indicators, heightened volatility may be the new normal.