Yesterday, we showed you a chart of RBC Capital Market’s Market Sentiment Indicator, which is an aggregation of six popular stock market sentiment indicators.
RBC’s Economic Sentiment Indicator is similar, but as its name would suggest, it focuses specifically on sentiment towards the economy rather than the stock markets. From RBC’s Myles Zyblock’s U.S. Equity Strategy Weekly report:
Economic sentiment indicators typically turn on a 6- to 9-month cycle, a time frame that better mimics the ebb and flow of business cycle dynamics. Some of these indicators include the NFIB Small Business Optimism Index, ISM, and the Conference Board’s Consumer and CEO sentiment surveys.
RBC combined eight popular reads on sentiment: 1) the index of economic policy uncertainty, which peaked in August and is falling; 2) the NFIB small business optimism index, which is below average but improving; 3) the ISM manufacturing index, which is neutral but trending positively; 4) the ISM non-manufacturing index is accelerating toward extreme optimism; 5) the Conference Board’s consumer confidence, which is neutral after being extremely pessimistic; 6) the National Association of Homebuilders housing market index, which continues to be extremely pessimistic, but is improving; 7) the Conference Board’s CEO business confidence, which is neutral but off its lows; and 8) the high yield credit spread, which is currently neutral.
So, what is RBC’s aggregated economic sentiment index telling us?
Like most of the indicators would suggest, sentiment is improving sharply, but is only at neutral levels.
Here are the charts from RBC:
Photo: RBC Capital Markets