Depressed Consumers

In our third weekly instalment, we are looking into consumer confidence globally. Although consumer confidence has collapsed, there is a slight possibility for the worst to be behind us.

Usually this time of year is a happy one; people are cheerful and looking forward to spending time with families. But this year, a lot got in the way — a war at the door of Europe, high inflation, an energy crisis, a correction in the stock markets, the bursting of the crypto bubble, and a housing crisis, amongst other things. While people will love spending time with their loved ones, the conversation around the dinner table might not be so joyful. However, next year may not be as bad as expected, considering the extreme levels reached in consumer confidence globally. 

In Asia, the Chinese zero-Covid policy significantly impacts consumer confidence. It really can’t get any worse at this point, but who knows…

Australian consumer confidence keeps falling as well…

Ditto for Japanese consumer confidence. Hard on the heels of the collapse caused by Covid in 2020, Japanese consumer confidence seems to be headed towards an all-time low…

In Europe, consumer confidence is bouncing but remains low…

Both private and institutional investors' expectations are low, but it looks like they have bottomed…

In Germany, growth expectations seem to have bottomed…

But German retail activity suggests that weakness still has to materialise in hard data like German GDP. Based on the correlation between the two, we can expect GDP to be weak for Q4 ‘22 and Q1 ‘23…

In France, consumer confidence bounced right near its all-time low…

We can observe a similar behaviour coming from the south of Europe — here, in Italy…

and Spain…

In the US, sentiment reached its bottom when inflation peaked, and began to recover weakly as bad buying conditions incrementally improved…

As in Europe, US consumer confidence seems to have found a bottom…

Consumer depression seems to be priced in the markets…

However, high interest rates due to high inflation are damaging the housing sector, where buyers and builders are highly depressed. It seems logical to expect more pain on that front until the Fed reverses course on its policies…

In a nutshell:

We are getting mixed signals from consumers globally.

In Asia, consumer confidence has yet to find a bottom, while in Europe it has been showing signs of improvement.

In the US, consumer discouragement seems to be priced in already. However, the housing market is still far from a recovery, at least until the Fed pauses or reverses the current hiking cycle. 

2023 will be a challenging year — as I mentioned in a previous edition, markets never bottom before a recession but usually in the middle of one or after. I still expect markets to find a new low, but I do not expect a full blow-up. 

We are facing the most expected recession in history; luckily, there is still a possibility it will be a mild one.  

For the moment, I will wait and see. The Fed's actions are dictating the market's behaviour, and I would rather be cautious than sorry. 

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Dear readers,

We wish you and your loved ones a very happy Christmas. 2022 was a stressful and challenging year. We’re hoping that we can all relax in 2023, although that seems rather unlikely. 

We are committed to continuing to do our best to filter the noise and bring you relevant information.

In January, we will publish our first major piece, "Genesis," introducing our entire framework and giving you a taste of what to expect from “The Mad King” going forward. 

We also have an extensive lineup of must-read articles covering technology and macro in the works.

One sure thing is that 2023 is going to be an exciting year, and we sincerely hope that you will come along on our journey. 

Enjoy your holidays, and make sure you disconnect from all the market madness so you are well-rested and ready for 2023. 

Sincerely yours,