Consumer confidence around the world remains buoyant, and the U.S. is no exception. Domestic consumer optimism has been unflappable despite an escalating trade conflict and growing fears of a U.S. recession. Irrespective of the uncertainty overhang and bouts of volatility, the S&P 500 has posted an approximate year-to-date gain of 16%—these double-digit equity market returns have continued to preserve U.S. household wealth. On the flip side of net worth, real estate prices and the U.S. housing market have somewhat cooled this year. However, 30-year mortgage rates have retreated to a 5-year low thanks to a dovish Federal Reserve. Against a backdrop of lower unemployment and lending rates, we could see mortgage applications for new home purchases move higher. A rise in mortgage applications would mean that consumer optimism should actually register in the U.S. economy, and hopefully portend a rebound in business sentiment. Yet, there is a risk that consumer sentiment may turn more negative alongside business confidence, which would likely be led by an upturn in jobless claims.
Groupthink is bad, especially at investment management firms. Brandywine Global therefore takes special care to ensure our corporate culture and investment processes support the articulation of diverse viewpoints. This blog is no different. The opinions expressed by our bloggers may sometimes challenge active positioning within one or more of our strategies. Each blogger represents one market view amongst many expressed at Brandywine Global. Although individual opinions will differ, our investment process and macro outlook will remain driven by a team approach.
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