In the History of the Conference Board, consumer confidence has never fallen as low as this month. Analysts had thought that the drop in gasoline prices would help raise confidence, but the economic tsunami overwhelmed any good feelings and it is clear that it is going to be a terrible Christmas Season for retailers.
Ian Shepherdson of High Frequency Economics estimated that if the expectation index remains at 35.5, real consumer spending would fall at an annual rate of about 3.5% this quarter, worse than the 3% drop he expects in the third quarter.
As the stunning fall in the last ten minutes of yesterday’s market session showed, there are still plenty of hedge funds and mutual funds being forced to liquidate equity positions to pay cash to their shareholders who want out. Although I believe this forced selling will slow in the coming week, there is no good news on the horizon.
The only good news is that the market has probably discounted a fairly deep recession into the current price of stocks.