Sigma Signals

Week of August 14, 2023

A recession can be a self-fulfilling prophecy. As consumer sentiment declines, so does consumer spending. If the economic outlook is grim, consumers feel they have to spend less. Fewer transactions and a falling velocity of money lead to recessionary concerns. Thus, a negative feedback loop is born. The Consumer Sentiment Index hit an all-time low in June of 2022. This August, at 71.2 points, the index is 42% higher than in June 2022; nearing the historic average of 86 points. A strong economy can also be self-prophesied. No changes to our signals. Michael Mullenax & Bob Bilkie, CFA