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Please read this article about how the drop in consumer is good for stocks and write a paragraph or 2 of 300 words summarization of it.
Home Investing Stocks >Mark Hulbert GET EMAIL ALERTS Opinion: That steep drop in consumer sentiment is actually good news for stocks Published: Jan 22, 2019 10:41 a.m. ET S&P 500 tends to perform better following low readings than after high ones CLOSING LIQUIDATION SALE STORE CLOSING arr $29 $39 5 EVERYTHING MUST GO

Home Investing Stocks >Mark Hulbert GET EMAIL ALERTS Opinion: That steep drop in consumer sentiment is actually good news for stocks Published: Jan 22, 2019 10:41 a.m. ET S&P 500 tends to perform better following low readings than after high ones CLOSING LIQUIDATION SALE STORE CLOSING arr $29 $39 5 EVERYTHING MUST GO

CHAPEL HILL, N.C. - The recent huge plunge in consumer sentiment is good news Thats because consumer sentiment is a contrarian indicator. The stock market tends to perform better following low readings than after high ones. Keep this in mind as you digest the latest University of Michigan consumer sentiment index reading that was released this past Friday, which showed a much- bigger-than-expected drop from the December reading. In fact, the index fell to its lowest level since October 2016-hitting its lowest level since President Trump took office, as CNN reported. Almost without exception, the headlines are painting this as bad news. The New York Times reported that Fridays release suggests mounting danger for Mr Trump and the economic expansion that he claims as a strong point of his Presidency. Before you get too discouraged, however, think back to last March, when the University of Michigan consumer sentiment index hit its highest level in 14 years. Far from indicating that happy days were here again, I argued at the time that the indexs high reading was a reason to build up some cash. The S&P 500 SPX, +0.22% today is lower than where it stood then.

Aa Thats just one data point, of course. But it is consistent with what I found upon feeding into my PCs statistical package the University of Michigan consumer sentiment data back to 1977, which is when the index began being updated on a monthly basis. Its also consistent with the conclusion of a study conducted nearly two decades ago by Meir Statman, a finance professor at Santa Clara University, and Kenneth Fisher of Fisher Investments. They found that consumer confidence declines when stock prices decline but investors need not fear that declines in consumer confidence would be followed by low stocks returns. Low consumer confidence is followed by high stock returns more often than it is followed by low stock returns. Statman and Fisher found this contrarian pattern is strongest in Nasdaq-listed stocks. For this column l updated their results with another two decades of data; the table below shows the average performance of the Nasdaq Composite Index following the 10% of biggest one-month jumps in the University of Michigan index and the decile of largest one-month declines. Nasdaq Following 10% of months since 1977 with the... Nasdaq Composite gain over subsequent quarter Nasdaq Composite gain over subsequent six months Nasdaq Composite gain over subsequent month Composite gain over subsequent year Biggest 1-month gains in the U. of Mich. Sentiment index 08% 26% 3.3% 9.4% Largest 1-month declines in the U. of 29

MarketWatch Nasdaq Nasdaq Nasdaq Composite Nasdaq Following 10% of months since 1977 with the... Composite over subsequent gain gain over Composite gain over subsequent Composite gain subsequent sixover subsequent months month quarter year Biggest 1-month gains in the U. of Mich. Sentiment index 0.8% 2.6% 3.3% 9.4% Largest 1-month declines in the U.of Mich. Sentiment index 2.2% 5.2% 8.5% 14.9% To be sure, given the large variability in the Nasdaqs performance, the differences reported in this table are of only marginal statistical significance. Still, its noteworthy that the correlations, even if only marginally significant, are in the opposite direction from what is being assumed by those who see doom and gloom. One of the strongest statistical patterns that does emerge from the data is between consumer confidence and the S&P 500s trailing performance. That helps to explain the big plunge in the University of Michigans latest consumer sentiment survey, since it came in the wake of the severe stock-market correction (some say bear market) that took place in the last quarter of 2018. Notice, however, what that means: Using the consumer confidence data as a guide to your investments is akin to driving by looking in your rear-view mirror. Good luck with that.

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the article provided a platform to understand how consumer confidence and stock market are inversly related. the relation is so because the stock market tend to perform better than before following a low reading after than high ones. to give better insight into the matter, datas has been used which shows that michigan consumer sentiment index which showed a much bigger drop than ever before since december. the news headlines made it show as a curse but the author who was of totally opposite view showed that the low consumer confidence reading often is followed by high stock returns than low which was also proved by a study conducted by meir statman and kenneth fischer. there study highlighted one more thing as well which is the contratian pattern of consumer confidence index and the stock returns are highest in nasdaq listed stocks. the data presented here though does not show strong negative correlation but is marginaly significant which shows there is no direct relationship between the two. one more thing that can be infered from the given data is that the relation between consumer confidence and the S&P 500s trailing performance is the strongest. which clearly explains why there was a big plunge in the consumer confidence index of michigan.

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