Stock markets once again proved that they are pricing in problems ahead. On Tuesday, the Conference Board’s Consumer Confidence Index reported a significant decline. Tariff threats, which lead to an increasingly isolated U.S., hurt sentiment.
The index read was 98.3, down from 105 in January. Economists expected a 102.5 reading. The confidence reading is now down three months in a row. What is worse is that the average 12-month inflation expectation increased to 6% in February, up from 5.2%.
Investors exposed to consumer spending should hold consumer defensive stocks. Procter & Gamble (PG) and Johnson & Johnson (JNJ) traded near 52-week highs. Ahead of the economic data, investors increased positions in those firms. Similarly, Kraft Heinz (KHC), Mondelez (MDLZ), and Hershey Company (HSY) rebounded.
Stagflation Risks
Stagflation risks are rising. Inflation will likely continue, especially after the U.S. imposes tariffs on its key trade partners. The U.S. economy may slow as countries decide to do less business with Americans.
Stock markets, which briefly touched all-time highs, are losing momentum. The recent streak of the index closing lower is a troubling sign. Neutral markets may turn into bearish ones. Nasdaq (QQQ) is due for correction, too. In Tuesday’s stock market, Nvidia (NVDA), Tesla (TSLA), AMD (AMD), and Dell Technologies (DELL) closed lower.
