Despite the heat, the animal spirits are cooling off
|Summary
-
Our Animal Spirits Index (ASI) fell in June to 0.53 from 0.88 in May but has remained positive in all six months of 2024.
-
Most components were subtractive in June, with the only strength tied to indicators reflecting the stock market.
-
Though a positive reading, it sits below the year-to-date average of 0.75 and is the lowest index value seen since November of last year, reflecting the recent deceleration seen in the U.S economy.
Stormy spirits ahead?
Our Animal Spirits Index (ASI) fell in June to 0.53 from 0.88 in May but has remained positive in all six months of 2024 (chart). Previous reports detail the index's methodology, but on a basic level, an index value above zero indicates optimism and a value below zero suggests pessimism.1 Though June's reading remains positive, it sits below the year-to-date average of 0.75 and is the lowest index value seen since November of last year.
The ASI consists of five indicators: the S&P 500 Index, the Conference Board’s Consumer Confidence Index, the yield curve (the spread between the 10-year and three-month Treasury yields), the VIX Index and the Economic Policy Uncertainty Index. The policy uncertainty and VIX indices inversely affect the ASI. In other words, a rise in uncertainty or volatility decreases the index, while a fall increases the index, all else equal.
Most components were subtractive in June, with the only strength tied to the indicators reflecting the stock market. The S&P 500 Index reached another record high, and rose roughly 183 points over the month. Year-to-date, the index is up 13% and has contributed positively to the ASI for five out of the six months of 2024. Stock market volatility remained roughly the same from May to June, falling slightly to 12.44 from 12.92 previously. In the bond market, the yield spread on the 10-year and 3- month Treasuries widened to -94 bps from -77 bps in May. The yield curve has been inverted since November 2022 and continues to weigh heavily on the ASI.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.