Consumer Sentiment Worsens In April, Inflation Expectations Rise Further: Stocks Fall, Gold Surges Above $2,400
Portfolio Pulse from Piero Cingari
The University of Michigan's April report on U.S. consumer confidence revealed a decline in sentiment and an increase in inflation expectations, causing stocks to fall and gold to surge above $2,400. The consumer sentiment index dropped to 77.9, missing expectations, with sub-indexes for consumer expectations and current conditions also declining. Year-ahead inflation expectations rose to 3.1%, and long-term expectations to 3%. The SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust (QQQ) saw declines, while the SPDR Gold Trust (GLD) and iShares 20+ Year Treasury Bond ETF (TLT) increased in value. The Energy Select Sector SPDR Fund (XLE) was the only sector ETF to trade in the green, supported by rising oil prices.
April 12, 2024 | 2:30 pm
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POSITIVE IMPACT
The SPDR Gold Trust rose by 1.5%, breaking fresh record highs above $2,400 per ounce, as investors sought safe havens amid rising inflation expectations and declining consumer confidence.
GLD's increase is a direct response to the consumer sentiment report, as gold is traditionally seen as a safe haven during times of economic uncertainty and inflation.
CONFIDENCE 95
IMPORTANCE 85
RELEVANCE 95
POSITIVE IMPACT
The iShares 20+ Year Treasury Bond ETF rallied 1.2%, reflecting a move towards safe-haven assets in response to the consumer sentiment report, with treasury yields falling.
The rise in TLT indicates a shift towards safer investments, a common reaction to negative economic indicators such as declining consumer confidence and rising inflation expectations.
CONFIDENCE 90
IMPORTANCE 75
RELEVANCE 85
POSITIVE IMPACT
The Energy Select Sector SPDR Fund was the only sector ETF to trade in the green, buoyed by rising oil prices due to tensions in the Middle East, despite the overall negative market sentiment.
XLE's positive performance in a down market is attributed to external factors, specifically rising oil prices driven by geopolitical tensions, rather than the consumer sentiment report itself.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 75
NEGATIVE IMPACT
The Invesco QQQ Trust experienced a 1.1% decrease, likely impacted by the same factors affecting SPY, with tech stocks possibly being more sensitive to shifts in consumer sentiment and inflation expectations.
QQQ's larger drop compared to SPY could be due to its tech-heavy composition, which may be more vulnerable to changes in consumer sentiment and inflation expectations.
CONFIDENCE 85
IMPORTANCE 75
RELEVANCE 85
NEGATIVE IMPACT
The SPDR S&P 500 ETF Trust fell by 0.8% following the release of the consumer sentiment report, indicating a negative market reaction to the worsening consumer confidence and rising inflation expectations.
The decline in SPY is directly related to the negative consumer sentiment report, as lower confidence and higher inflation expectations typically lead to reduced consumer spending and economic uncertainty.
CONFIDENCE 90
IMPORTANCE 80
RELEVANCE 90