It’s another solid session for the market, which seems to be in consolidation mode ahead of the three-day weekend. That said, it’s hard to ignore strong economic data and key earnings reports. Consumer Sentiment from the University of Michigan came in as expected, as current conditions and expectations climbed sharply from a year ago.
Interestingly, the report looks back at the Clinton impeachment, and how it didn’t derail the economy, it actually gained momentum (see statement below).
U.S. consumer sentiment remained elevated in January as record stock prices and a strong job market buoy Americans, suggesting spending will continue its steady gains.
This stability extended to all components, both current assessments as well as future economic prospects. Impeachment was barely mentioned--just by 1% of consumers. While those that mentioned impeachment were also somewhat less optimistic than other consumers, the small numbers had a negligible impact on the overall level in consumer sentiment.
It is of some interest to note that during the Clinton impeachment, sentiment similarly rose: the Sentiment Index rose from 100.5 in the December 1998 survey when the House voted for impeachment, to 108.1 in February 1999, when the Senate voted to clear Clinton.
Importantly, the economic expansion lasted another two years, with the economy peaking in March 2001, setting the record for the longest expansion since the mid-1950s. The current expansion has established a new record length largely due to consumer spending. Consumers will continue to sustain the expansion due to their favorable judgements about their current and prospective financial situation.
Of course, whether that strength will last another two years is uncertain, given that the election season has only begun and features fundamental changes in taxes and spending programs that directly affect consumers.
The earnings calendar is jammed pack next week, so rest up over the holiday weekend. Enjoy and be safe.
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