The University of Michigan reported a recent plunge in its Consumer Sentiment Index. Contrary to what you might logically expect, this is actually a positive for the stock market. Analyst Mark Hulbert notes that the American consumer is a fairly reliable contrarian stock market indicator, and calculated the data in the chart below. More often than not, large declines in consumer confidence have been followed by above-average stock market returns. As Warren Buffett says - it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful.” (Chart from Mark Hulbert, marketwatch.com)
Jeffrey Cerny