Daily Gains Letter Warns Falling Consumer Confidence Could Be Economic Recovery Roadblock

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Daily Gains Letter financial analyst Moe Zulfiqar cautions readers that plummeting consumer confidence levels could be a major issue that blocks the progression of the U.S.’ economic recovery.

Daily Gains Letter (www.DailyGainsLetter.com), an e-letter of Lombardi Publishing Corporation, a 27-year-old consumer publisher that has served over one million customers in 141 countries, cautions that plummeting consumer confidence levels could be a major roadblock for economic recovery in the U.S.

In late October, three closely followed consumer confidence indices showed that fewer Americans believe the economy is heading in the right direction. As a result, declining consumer sentiment could weigh on spending and economic growth.

In October, the Conference Board Consumer Confidence Index retraced more than 11% month-over-month to 71.2 from 80.2 in September, while the Consumer Expectations Index declined 15.5% in the same period. On top of that, the University of Michigan Consumer Sentiment Index currently sits at the lowest level in 2013 and has been in a sharp decline since July. (Source: “Consumer Confidence Decreases Sharply in October,” The Conference Board web site, October 29, 2013; http://www.conference-board.org/press/pressdetail.cfm?pressid=4990.)

“One of the overarching factors weighing on consumer confidence is the weak job market. U.S. unemployment remains stubbornly high at 7.2% and wages remain stagnant. This, coupled with sluggish spending and the U.S. economic shutdown, is likely to be a drag on economic growth in the fourth quarter,” says Daily Gains Letter financial analyst Moe Zulfiqar. “Currently, we are seeing too much attention being paid to the key stock indices making new highs each day, but not to the underlying factors that affect them.”

Zulfiqar asserts that declining consumer confidence levels suggests spending is going to be bleak, as is evidenced by a large number of companies on key stock indices reporting weaker than expected sales and earnings. In late October, 244 companies on the S&P 500 reported third-quarter corporate earnings, and only a little more than half were able to beat the estimated revenues. (Source: “Apple continues to be largest drag on S&P 500 technology sector earnings growth,” FactSet web site, October 25, 2013; http://www.factset.com/insight/2013/10/earningsinsight_10.25.13.)

Zulfiqar says that, if this trend continues, which he thinks it will, then it can do a significant amount of damage. “For example, if consumer confidence plummeting results in decreasing consumer spending, the retailers will face troubles. And if those retailers are not able to sell product, they will have to reduce staff to stay profitable, and so on.”

“Investors have to be really cautious about what kind of investments they make,” Zulfiqar concludes. “If their portfolio consists of companies in the consumer discretionary sector, they should consider taking some profits off the table or reducing their exposure to the sector.”

Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation and Daily Gains Letter, visit www.lombardipublishing.com.

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Release ID: 25582

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Organization: 350 5th Avenue, 59th Floor, New York, NY 10118
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