Michigan Consumer Confidence Reaches Highest Point Since July 2021

• The Consumer Sentiment rose from 69.7 in December to 78.8 in January.
• Present Economic Conditions saw an improvement from 73.3 to 83.3.
• The Consumer Expectations Index increased from 67.4 to 75.9.

On January 19, the University of Michigan published its initial Michigan Consumer Sentiment report for January.

The report revealed that Consumer Sentiment rose from 69.7 in December to 78.8 in January, surpassing the analyst consensus of 70. The current Consumer Sentiment level marks its highest point since July 2021.

Current Economic Conditions improved from 73.3 in December to 83.3 in January, and the Index of Consumer Expectations increased from 67.4 to 75.9.

The University of Michigan remarked that "over the past two months, sentiment has increased by a combined 29%, representing the largest such surge since 1991, following the end of a recession." Additionally, they noted that sentiment improvement was widespread across various demographics including age, income, education, and geography, similar to December.

Following the release of the stronger-than-expected Consumer Sentiment data, Treasury yields continued to climb. Bond traders are betting that the Fed may adopt a more hawkish stance than previously anticipated due to the stable state of the economy.

After the report was published, the U.S. Dollar Index settled around the 103.50 level, supported by the rise in Treasury yields. The dollar has been gaining strength since the beginning of the year as traders have reduced their expectations of a dovish Fed.

Gold retreated towards the $2025 level as traders focused on the robust dollar and increasing Treasury yields. There is a possibility that the Fed will maintain the federal funds rate in March, which is seen as negative for the gold market.

The S&P 500 index settled below the 4800 level subsequent to the report's release. The outlook for Fed policy continues to be the primary driver for equity markets, although strong economic data may ultimately offer some support to stocks.