U.S. Consumer Confidence At Three Year High

The University of Michigan consumer confidence survey has reported the highest reading in three years. Does this vindicate a bullish consensus on the economy and the stock market? Well, first the two aren't the same as we've witnessed many times in the past. Second, the last time the survey showed such a positive reading was January of 2004. While the economy was strong at the time, the equity markets were making a major intermediate term top in January of 2004. Historically consumer confidence is very limited in it's "usability" except at extremes. What happened after January of 2004? The semiconductor stocks fell by one third and still have not retaken their January of 2004 price to the upside three years later. The technology laden Nasdaq fell about twenty percent as well. As I've stated on here time and again, sentiment is a tricky indicator best used by professional traders as confirmation. With unemployment at less than 5%, oil dropping and the stock markets at multi-year highs, what would one expect of consumer confidence? It would be strong just like Wall Street sentiment I talked about a few days ago. What does that mean about the future? Well, as January of 2004 points out, it means nothing. If oil were $80 a barrel and the stock market was down 20%, where would one expect consumer confidence? To be down of course. Consumer sentiment is, at best, a coincident data point of economic and/or investment returns.