The Numbers
A Run at the Latest Data from ABC's Poobah of Polling, Gary Langer
Gary Langer is director of polling at ABC News, where he's covered the beat of public opinion for nearly 20 years - conducting and analyzing ABC News polls, evaluating data from other sources and setting the news division's standards for poll reporting. Langer is a two-time Emmy award winner, both for ABC's reporting of public opinion polls in Iraq.
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Consumer Confidence and the Markets
January 22, 2008 12:15 PM
Steep drops in the stock market historically have not had much short-term, direct influence on consumer confidence, for a simple reason: Most people simply haven’t seen market gyrations as having a lasting impact on their day-to-day personal finances.
While it’s commonly noted that most Americans own stocks, that includes indirect holdings through mutual funds and retirement plans. Far fewer own individual shares directly, especially when you exclude their own employer’s stock – just 22 percent in a Pew poll in fall 2006.
Most, moreover, are passive, long-term investors; last fall only 6 percent said they trade stocks or funds “pretty regularly,” no different than when we asked a similar question in the midst of the market meltdown of 2001. Buy and hold is the norm.
There’s also a good deal of built-in acceptance of market shifts. In a poll we did a few years ago, 69 percent called the stock market “risky,” and it’s been as high as 80 percent after the 2001 correction. Even then, in a poll we did in July 2002, just 17 percent said rises and falls in the market affect them “a great deal.”
This doesn’t mean market falls are painless. Plenty of people are hurt by drops in the price of shares, especially those who rely on the markets for income. For many others, though, these are paper losses offset by previous paper gains. Most seem to recognize that markets go up as well as down, and in the long run beat the heck out of passbook savings. And most are much more sensitive to more direct factors, such as incomes, inflation (e.g., the price of gasoline) and the job market.
The table below lists the largest one-day postwar drops in the Dow in percentage terms, and what happened to consumer confidence in the ensuing week and month. The answer: Not much. Even the Dow’s largest drop, 22.6 percent on Oct. 19, 1987, was immediately followed by a relatively meager 4-point decline in our weekly Consumer Comfort Index.
Shifts in the consumer index like those in the table – generally 2 to 4 points – are unremarkable. Over its 22-year history it’s fallen by 3 points in a single week 72 times and by 4 points 50 times. The CCI’s rarer, bigger drops appear unrelated to market events.
Largest Postwar Percentage Drops in the Dow
Dow's Change in ABC CCI
Date decline Week later Month later
10/19/87 -22.6% -4 points -7 points
10/26/87 -8.0 -3 -3
10/27/97 -7.2 +1 +4
9/17/01 -7.1 0 -2
10/13/89 -6.9 0 0
1/8/88 -6.9 -2 -3
None of this is to say that the market is irrelevant to consumer views; confidence is worth closely watching in the weeks ahead. It’s simply to say that with history as a guide, the market’s impact on overall consumer confidence should not be overstated.
January 22, 2008 | Permalink | User Comments (2)
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Ok the feds stepped in, congress is paying attention and the president is on-board about the economy - finally.
The subprime mortgage market should have never been allowed.
Damage control is one thing, but applying lessons learned is quite another.
Bet they are already thinking about how to rebrand the phrase subprime mortgage to something catchy - like maybe "bubble mortgage"
Posted by: Michael Arsenault | Jan 22, 2008 1:08:13 PM
The historical data regarding how "consumers" regard market gyrations, especially the wild ones we are seeing now, no longer pertain. Yes, we are all paying attention to the markets, because we have all, in one way or another, through 401 K retirement plans, involvement in the housing market, or through seeing rapid food, energy, and medical inflation and the steady devaluation of our dollar against other currencies, become painfully aware of Wall Street's greed and irrationality and the totally bankrupt "logic" of the Federal Reserve
having the US Treasury deep in green ink and thin paper printing up dollars for injecting liquidity into "the markets".
I would love to see a shift in the PHILOSOPHY of our present economic dilemma. First of all, it would be great if the media and economists and those in government would stop calling US citizens "consumers" and "borrowers" and stop blaming us for the sudden slamming on of the brakes and the tumbling of stocks, bonds, and the evaporation of credit. We have all "wisened up" and understand that stimulus plans which "give us" money is "borrowed" money and that adding to our deepening deficit is only perpetuating the problem which this kind of economic philosophy caused.
You are wrong! Americans do understand what all the economic indicators portend, at least we do this time around..at this point in history.
Posted by: Karen | Jan 22, 2008 6:48:44 PM
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