Consumer Confidence And Stock Market Returns (Backtest)
First a reminder: We have published a short strategy bundle (3 short strategies):
3 Short Selling Strategies (Trading Strategy Bundles)
One of the most important macro numbers is the monthly consumer confidence sentiment.
In the US, consumer confidence is calculated by the Conference Board and published at 10 a.m. ET on the last Tuesday of every month. Thus, you can develop a trading strategy based on the consumer confidence reading for the coming month by using monthly data.
If we overlay both the stock market (S&P 500) and consumer confidence we get the following chart:
The red line is the stock market (left axis and logarithmic scale) and the blue line is consumer confidence (linear scale).
It looks like stocks tend to go down after consumer confidence has dropped. Is this correct? There is only one way to find out and that is to backtest. It turns out that it’s much better to be invested in stocks when the consumer confidence is bullish and not bearish.
If you want to know the results please read our full article:
Consumer Confidence And Stock Market Returns (Strategy And Backtest)
Yesterday we also looked at how the Turnaround Tuesday Strategy performs in a bear market. We made a backtest:
