August 15, 2023 by Mike Antonacci
For those avid readers of our blog, a year ago we posted an article examining the interplay between consumer sentiment (how people feel about the economy), and actual subsequent 12-month returns of the S&P 500. A major takeaway was that historically people’s feelings about the state of the economy have been a poor predictor of future stock market returns.
In fact, the data shows that when people feel the least confident about the economy the market has averaged much higher returns over the ensuing 12-month period compared to the average returns over the 12-month period following peak consumer confidence in the economy.
At the time, June 2022's consumer confidence reading was the lowest on record going back more than 50 years. Now, armed with 12-months’ worth of ensuing S&P 500 performance data, we wanted to revisit this analysis.
As you can see from the chart below, the S&P 500 returned 17.6% over the period (not including dividends). A remarkable result considering many consumers (and market commentators) are still bracing for a potential recession.
While it certainly remains true that past performance is not a reliable indicator of future results, this is another data point in favor of staying invested even when economic pessimism is the order of the day.