According to Yahoo Finance, market professionals say the Federal Reserve won’t be able to ignore the red flags being raised by US households.
“Sentiment isn’t wobbling at the edges or drifting lazily lower. It has collapsed,” said Mark Malik, CIO of Siebert Financial.
Worsening consumer sentiment might be among the biggest red flags in the economy right now. Top economists such as Mark Zandi have repeatedly emphasized that the US is on the brink, with just a few things holding back a downturn.
After the University of Michigan’s consumer sentiment survey dropped to one of the lowest levels ever earlier this month, the Conference Board on Tuesday showed similar results from its survey. Its confidence gauge fell to the lowest level since April, on a mix of inflation and labor market anxieties.
While few companies are hiring, many have opted to lay off significant chunks of their staff, leaving large groups without an income as the holiday season approaches. According to multiple experts, confidence in the economy is reaching dangerously low levels.
“Consumer sentiment is at its lowest level ever,” stated Mark Malik. “Sentiment isn’t wobbling at the edges or drifting lazily lower. It has collapsed. It has broken through historical floors.”
Malik added that the Federal Reserve needs to start paying attention to this trend before things worsen. He noted that monetary policy, which is intended to stabilize prices, is not working as intended.
“When consumer sentiment across all cohorts is flashing deep red, that is not nothing. It means households feel squeezed. It means the labor market doesn’t feel as strong from the inside as the headline numbers suggest,” Malik added.
Tie Lasater, CEO of Lasater Capital, also sees waning sentiment as a warning sign that markets and economists should be paying attention to.
“Historically, sentiment alone doesn’t cause recessions, but sharp, sustained collapses in confidence often precede or accompany economic slowdowns,” Lasater said. “When households lose confidence, they shift into defense.”
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