One of my favorite things to do is discover and utilize somewhat obscure, new, misunderstood, or underutilized datasets. Or indeed, to look at an existing and well-understood set of data in a different way. In today's post we look at a little bit of all of the above. What we've got here is a global composite consumer sentiment indicator I've calculated from the Thomson Reuters IPSOS consumer sentiment surveys (using IMF GDP data for the weightings).
I've shown this indicator against the key global equity benchmark (the MSCI All Countries World Index or ACWI for short), and the global manufacturing PMI (basically business confidence). The interesting thing about this chart is that up until the turn of the year, these 3 inter-related indicators were all headed in the same direction (i.e. up)... so what's changed?
Much like the OECD leading indicators, which we looked at last week, the global manufacturing PMI peaked and turned down (more or less about the same time as the ACWI did). But probably the standout observation in this chart is the apparent gap between the global manufacturing PMI (to the downside) vs global equities and consumer confidence. Those with a pessimistic take on the global economy will likely say that global equities and consumer confidence are going to "catch down" to the PMI.
Those running a more constructive outlook will say the fact the PMI has stabilized and the relative strength in consumer confidence are positive signs, and that it will most likely be back to business for global equities, following a correction/shakeout in sentiment. I'm leaning towards the latter given that I can find more reasons to be optimistic than pessimistic on the current state and outlook, and there have been some very interesting developments in global equity valuations (I will talk more about this in the upcoming Weekly Macro Themes report).
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