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Consumer Sentiment Drags Real Estate and Auto Stocks Down

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Real estate stock prices decreasing with weak consumer sentiment

Equity markets favor upbeat consumer sentiment reports. The recently released University of Michigan consumer sentiment final index fell to 85.7 in September, compared to August’s reading of 91.9. It fell below the consensus median estimate of 91. This index helps in gauging the future of household expenditures, especially on big-ticket items such as autos and homes.

The iShares US Real Estate ETF (IYR) measures the performance of the US real estate sector and is down 9.89% year-to-date as of September 11. It comprises stocks such as Simon Property Group (SPG) and American Tower Corporation (AMT), which are down 3.35% and 6.18% year-to-date, respectively. These stocks have a weight of 7.11% and 4.97%, respectively, in IYR as of August 31.

The University of Michigan Consumer Sentiment Index is a survey of consumer confidence published monthly by the University of Michigan. It gauges near-time consumer attitudes about the business climate, personal finance, and spending.

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Auto sector hit by fading consumer sentiment

With the fading of consumer sentiment in the economy, auto stocks have been badly hit. Auto stocks such as Ford Motor (F) and General Motors (GM) were down 16.76% and 10.35%, respectively, over the past year as of September 11.

However, not all is wrong with consumer spending behavior. A consumer-related exchange-traded fund, the Consumer Discretionary Select Sector SPDR ETF (XLY) is up 10.94% as of September 11 for the same period. The automobile sector has a weight of 4.75% in this ETF as of September 10.

After a remarkable increase in June of 96.1, the consumer sentiment index is trending lower. A stronger dollar, low inflation, and tightening labor markets may be a reason for cautious spending by consumers.

Inflation is one of the leading indicators tracked by the market. Germany’s inflation rate is out, and we’ll cover this in the next article.

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