Markets

Published: May 15, 2023
Updated: May 15, 2023

Consumer Sentiment and Economic Indicators Reflect Uncertainty in the US Market - First signs of recession worldwide?

Consumer Sentiment Declines Amid Economic Uncertainty

Consumer sentiment in the United States is facing a decline due to increased uncertainty surrounding the economy and concerns about the potential default of the US government's debt. In May, consumer sentiment fell sharply to a six-month low of 57.7, compared to 63.5 in April, which was well below the estimated level of 63.

American Households Embrace Frugality

A report from the New York Fed reveals a growing trend of frugality among American households. Monthly household spending growth decreased to 5.4% from a revised 7.1% in December, indicating a cautious approach to spending.

Focus on Retail Sector and Economic Indicators

This week, the attention of market observers will be on the retail sector, as Q1 earnings reports are released, including those from major retailers like Target on Wednesday and Walmart on Thursday. Additionally, April retail sales data will be released on Tuesday, with some previews suggesting the possibility of softness in the figures.

Market Performance and Commodity Trends

On Friday, the S&P 500 experienced a decline but managed to recover from its lows. The Dollar Index showed a 1.3% increase over the past two sessions, impacting the price of gold. Furthermore, Brent crude oil prices softened, falling below the $75 mark.

Bullish Case: Stable Credit and Loan Conditions

Amidst the concerns, there are positive signs as well. The NFIB survey did not reveal any signs of new credit strains from small businesses, providing some reassurance. Additionally, the Fed Senior Loan Officer Opinion Survey indicated no notable changes despite recent stress among regional banks.

Bear Case: Market Challenges and Economic Indicators

However, there are bearish aspects to consider. The lack of market breadth is evident, with 48% of S&P 500 stocks experiencing negative year-to-date performance. Bank stocks continue to struggle, further adding to the concerns. Additionally, US jobless claims have reached the highest level since October 2021, and core inflation remains firmly above 5%.

Uncertainty in the US Market Amidst Consumer Sentiment Decline

The current state of the US market is characterized by declining consumer sentiment, driven by economic uncertainties and concerns over the potential default of the US government's debt. American households are exhibiting a frugal approach to spending, and economic indicators are reflecting mixed trends. While some positive signs emerge, such as stable credit conditions, challenges remain, including market breadth issues, struggling bank stocks, elevated jobless claims, and persistent high core inflation. These factors contribute to an overall sense of uncertainty in the US market.