As noted earlier, Consumer Confidence handily exceeded expectations in July.  Digging a little deeper into the details, however, we found some interesting trends in confidence levels based on income levels and age.  Starting with income, every income level has seen a boost in confidence since the election last November, but while sentiment is off its peak for consumers with higher and lower incomes, those with incomes in the middle ($35-$50K) saw their level of confidence rise to a new cycle high of 123.3 in July.  That was the best reading since June 2001.  Trump campaigned in support of the forgotten man, or those Americans right in the middle who seemingly receive little in the way of benefits but are still scrambling to get by, and based on July’s data, they don’t feel as forgotten.

In terms of how age has impacted confidence levels, we have also seen some notable shifts.  While consumers with incomes right in the middle of the income spectrum have seen the biggest boost to sentiment since Trump was elected, it has been the oldest Americans that it has had the most positive impact on.  As shown in the red line below, confidence among Americans over 55 surged after the election and is currently closer to its cycle-high than any other age cohort.  Meanwhile, consumers under the age of 35 actually saw their confidence level decline in July.  So what’s behind the different shade of glasses that different age groups are viewing the economy by?

In a word, Trump.  The chart below shows the spread in Consumer Confidence among consumers under the age of 35 and those over 55 on a six-month moving average basis in order to smooth things out. Because younger consumers have their whole life ahead of them, they are naturally more optimistic than older consumers who have likely reached and surpassed their peak earnings years.  But the chart below shows how in the last eight years the spread really widened to levels not seen in decades.

While a lot had to do with the fact that the economy was doing well, a big contributing factor was also the administration of Barack Obama, who for most younger Americans attained rock star like status. The shaded region in the chart shows the period from when Obama was first elected in November 2008 through the election of Trump in November 2016. Almost to the month when Trump was elected, confidence among younger Americans stalled out, while older Americans viewed the election as a new period of – to borrow a phrase from the Obama campaign – hope and change. In fact, at the current level of 20.25, the six-month average spread has dropped to its lowest level since June 2010!

After three straight months of declines, Consumer Confidence saw a solid rebound this month, rising from 117.3 up to 121.1.  July’s reading also handily exceeded the consensus forecast of 116.5.  While the headline reading in Consumer Confidence is still off its cycle-high of 124.9 from March, it still sits at levels that have rarely been seen in the last seventeen years.

Overall confidence was driven this month by consumer attitudes towards their present situation. As shown in the chart below, that index rose to 147.8 in July, which is the highest level in sixteen years.  Meanwhile, consumer attitudes towards the future aren’t nearly as positive as that reading barely increased in July.

The reason consumers appear to be so confident about their current situation is that it is easy to find work.  As shown in the “Jobs Plentiful” tracker, consumers feel that it is easier to find a job now than at any other point since July 2001.

Thanks to some relatively disappointing earnings results from companies in the Tech sector (Alphabet-GOOGL and Seagate-STX) and positive results from Caterpillar (CAT) and McDonald’s (MCD), the Dow spiked higher at the open while the Nasdaq 100 opened lower.  As a result of the divergence, the spread between the opening gap of DIA and QQQ was the sixth widest reading of the current bull market.  The only other days where we saw a wider divergence are shown in the table below.  Interestingly enough, one of those occurrences was exactly five years ago today! More importantly, though, all but one (8/24/15) of these occurrences came at the heart of various earnings seasons and suggests that moves like this are generally a short term phenomenon resulting from the flood of earnings reports rather than a sign of a longer term type of rotation.

Looking at the performance of both ETFs from the open to close on the five prior days shown below, there really hasn’t been much of a discernible trend where QQQ makes up for lost ground or DIA continues to run.  In three of the five days, QQQ outperformed DIA from the open to close, while on the other two days DIA outperformed.

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