As U.S. Slides Into Depression, Consumers Have Never Been More Bullish On Stocks

Not even in Khruschev’s wildest dreams did central planners ever conceive of anything so absolutely batshit insane as what is taking place in the centrally-planned US economy and "markets" right now.

With the US economy sliding into a depression with the BLS reporting – when one reads between the lines as Standard Chartered did over the weekend – that there were 42 million unemployed workers in April, pushing the unemployment rate to an unheard of 25.5%, far above the reported 14.7% (forget any hope for a V-shaped recovery as millions of those recently laid off will never get back to full-time work )…

… it is not a surprise that according to the latest New York Fed survey of consumer expectations, virtually every metric having to do with one’s financial well being – income, wealth, debt sustainability and earnings expectations – is cratering with expected earnings, income, and spending growth each hit survey lows which is what one would expect in a depression.

For example the expected probability of losing one’s job jumped to an all-time high of 20.9% from 18.5% in April; the probability of missing a minimum debt payment over the next three months surged to 16.2% – a 7 year high – from 15.1%, while expected earnings growth tumbled to the lowest on record at 1.87%, down from 2.05% in April .

Adding to the apocalyptic picture, median one-year ahead expected changes in home prices dropped to 0% for first time in survey history – as the average US consumer no longer expects their primary asset to increase in value – with 44.2% of respondents expecting home prices to decline over the coming year.

Finally, confirming that an inflation wave is coming, over the next year consumers expect gasoline prices to rise 4.9%; food prices to rise 5.43%; medical costs to rise 9.25%; the price of a college education to rise 4.64%; rent prices to rise 4.57%; needless to say all of these are far, far higher than the Fed’s "target" inflation rate of 2%.

But while the above data may not have been surprising, what was shocking is what the central bank reported was the average consumer expectation for stock prices in the future: according to the NY Fed, the mean probability that US stock prices will be higher one year from now surged to 51.8% up from 47.7%, above 50% for the first time ever and the highest print on record.

That this happens right after we posted that "Stocks Go Up As Everything Is Going Down In Flames", is just perfectly appropriate: Because with his job gone, his $400 dollars of emergency savings just spent on a roll of toilet paper, his bank preparing to foreclose on his home, all while a deadly virus lurks in dark corners, all Joe Sixpack can think of is how to get his "money on the sidelines" into the stock market as it is about to soar to all time highs.

And so, thanks to the Fed’s now grotesque interventions in all capital markets, including the purchase of over $2.6 trillion in securities in the past two weeks, the stock market is now perceived by conventional wisdom as a depression hedge – a countercyclical indicator which surges the worse the economy gets, and since the economy is sliding into a depression it is only "logical" – we use the term loosely – that expectations of higher stock prices have never been higher.

That of course is the absurdist interpretation of the above "data’. There was, naturally, a serious way of looking at this delightfully ridiculous data and lacking a sense of humor, David Rosenberg applied just that, tweeting last month when this series again hit an all time high that "I was so close to turning more bullish (less bearish?) until I see this metric was released by the New York Fed on consumer expectations.  Since when do bear markets end on record optimism?"

I was so close to turning more bullish (less bearish?) until I see this metric was released by the New York Fed on consumer expectations. Since when do bear markets end on record optimism? pic.twitter.com/Gddwl5JDbj

— David Rosenberg (@EconguyRosie) April 6, 2020

Well, David, you should have turned bullish because since April 6 – when you tweeted this and when consumer expectations for higher stock prices hit a record high for the first time  – stocks are up 18%!

Of course, since everything is now batshit insane thanks to the Fed, this was precisely what we warned would happen one month ago, to wit:

Oh David, "since when" do you still think that anything you observe in this economy or market, both stuffed to the gills with trillions and trillions in freshly printed fiatscoes, matters or makes sense. And to answer your question: bear markets end when the Fed says so, and proceeds to do to stocks what it did to IG bonds – and start buying directly.

Continuing our address to the bearish bond strategist, we also said "David, you may want to reasses your nothing can beat deflation thesis. Albert Edwards already has, and has said farewell to his "great ice age" thesis that defined his work for the past 30 years." Also read Paul Tudor Jones’ latest letter which laid it out best: "We are witnessing the Great Monetary Inflation (GMI)—an unprecedented expansion of every form of money unlike anything the developed world has ever seen."

We ended our rhetorical address to Rosenberg by asking "how long it will take you to realize that we now live in a time of helicopter money and that markets – by any definition  – no longer exist, and what comes next it a tsunami of debt and money much of which will finally make its way, kicking and screaming into the broader economy."

Ironically, what this career economist and widely-respected bond strategist still can’t grasp is by now all too clear to every Joe Sixpack on mainstreet, namely that the only thing that matters is this: