U.S. household enthusiasm for stocks often precedes significant market downturns historically.

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High levels of U.S. household enthusiasm for stocks often foreshadow market declines. Historical patterns indicate that when consumer confidence reaches this level, significant downturns typically follow. Key instances include:

  • January 2018: A poor year for stocks followed.
  • Start of 2004: Initiated a mild downtrend lasting several months.
  • March 2002: Marked the beginning of a major leg down in the 2000-2002 bear market.
  • January 2000: Preceded the March start of the 2000-2002 bear market.
  • March 1988: A false signal post-crash.
  • July 1987: The market experienced a crash three months later.
  • April 1998: Came just before the Russian crisis selloff.
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The relationship between consumer confidence in stock market expectations (projected over the next 12 months) and the S&P 500 (SPX) is well-documented, reinforcing the trend that high consumer enthusiasm often leads to downturns.

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Sources:

  • The Conference Board – Consumer Confidence Index reports and historical data.
  • Nasdaq – Analysis of stock market reactions to consumer confidence reports.
  • Benzinga – Reports on consumer confidence and stock market sentiment.
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