A surprising message on the economy from our Macro Index Model

Key points:

• There seems to be a fair amount of gloom regarding the state of - and the outlook going forward for - the economy
• The Consumer Confidence Index has plunged to record lows in recent months
• However, our most venerable economic tracking model - the Macro Index Model - just hit a high not seen in the last five years
• So who will ultimately prove to be correct? The masses as they anticipate an economic slowdown? Or the cold, hard economic data itself, which is signaling growing economic strength?
• As always, time will tell - but history does offer some potential clues

Consumer gloom is rampant

The chart below shows the history of the University of Michigan Consumer Confidence index, which recently hit a new all-time low of 44.2%.

So, obviously, consumers are feeling gloomy overall about the economy. Still, it is useful to note that low readings for this index have tended to be useful contrarian signs for stocks and the economy. Will that be the case again now? It is impossible to predict for certain. But it is interesting to note that consumer sentiment has essentially fallen off a cliff while a great deal of hard economic data is finally beginning to point higher for the first time in years.

The chart below shows our Mac