Consumer expectations matter and the equity downturn in three parts

 

Households have become less important to the overall stock market and represent only 37% of ownership, albeit this is higher than ten years ago. Nevertheless, the stock market will still be sensitive to consumer expectations. If there is growing consumer pessimism, then there will be less demand for risky assets. This pessimism will drive non-recessionary bear markets. 

The current equity environment is turning into three parts - a consumer pessimism caused by inflation, a discount rate repricing, and finally a bear market from an earnings recession slowdown. We have seen two of three parts to the current equity tilt.