It seemed rather insensitive for us to issue the MMPI Investment Report for 2020 Q1 in the past few weeks, so we held off. And yet despite the doom and gloom during Mar/Apr the report for Q1 is quite an impressive read. We might get around to issuing it next week. But first, we want to talk about the absolutely, hugely important matter of consumer confidence.
Market sentiment is a term that is used to describe the tone and feel of financial markets. It subtly represents the bristling battle between the bulls and the bears. Commentators often use the expression when attempting to forecast market direction. While it is true that professional market participants and their fancy computer algorithms do influence day-to-day pricing swings; it is consumer confidence that truly moves markets. The economic monikers of inflation, deflation, demand and supply are nothing more than representations of the level of confidence consumers have in purchasing goods; or borrowing money; or topping up their pensions. Where consumer confidence is at a low ebb, financial markets remain in the doldrums.
During any crisis, consumers rightly get confused. How did we get into this mess and how are we going to get out of it? Research shows that we rely on one another to quite a large extent when times get tough for our communities. We follow good example or, at least, perceived good example. We save. We hoard. We stay home. We stay safe. We exercise more. We watch Netflix box-sets. We worry. Following these trends, leads us into a more subdued way of life – until enough fresh good examples emerge to guide us back to confident pastures. Once consumer confidence returns, anything is possible.
During the limbo stage individual consumers will seek out expert advice on when the lockdown will end, when the pubs will reopen, when the social distancing will cease, when financial markets will regain their losses? Not realising that it is their own confidence that will rub off on others – creating a good example for everyone to follow. It is this “tagging along with the herd” that gets us all back up the ladder. If only we realised it earlier, consumer confidence would return much quicker.
Without consumer confidence the financial markets will not motor. Bank loans at close to 0% interest are no good if nobody wants to borrow. Share prices 25% off their peaks don’t represent value if nobody wants to purchase. Restaurants offering fine dining at knock-down prices will have no takers if consumers are scared of mingling. The negative mainstream headlines will continue to dampen down the embers; unless consumers arise with renewed confidence.
MMPI is convinced that consumers want to express confidence. The vast majority exude positivity. But it is our reliance on one another that is holding us back. We somehow need to believe that others are about to change and demonstrate more confident behaviour. If what we believe shapes how we act – then let’s start believing in each other!