3 Things You Need to Know This Week | PMIs, Consumer Confidence, US Housing Market

Transcript

Tim Schluter:

Hello, and welcome to Three Things You Need to Know This Week— our regular series designed to help you sift through the noise across financial media and understand what really matters for markets. To stay up-to-date with our latest market insights, subscribe to our YouTube channel or visit fisherinvestments.com. And with that, here are three things you need to know this week.

First, a check in on global business.

This week, financial data provider S&P Global publishes Final April purchasing managers' index data for the US, UK, eurozone and Japan. Final April numbers will refine the initial estimates, or "flash PMIs," that were released last week. PMIs matter for stocks because they are forward-looking, providing insight into where businesses see themselves going next. That's different from most economic data, which often tell us what has already happened in the economy. April is the second month of PMI data since the start of this year's war in Iran. March PMI readings showed a resilient global economy. The private sector continued growing despite supply-chain disruptions caused by the conflict. Notably, the eurozone's manufacturing PMI surged to 51.6, beating expectations and marking its strongest growth in three years. April's initial estimates for the US, UK and Japan continued to show growth. And the composite PMI, which combines data for manufacturers and service businesses, exceeded forecasts in the UK. In contrast, the eurozone's flash composite PMI declined, weighed down by a weaker service sector; though, the manufacturing PMI continued to climb and surpassed expectations once again. Importantly, when looking at PMI readings, remember that wiggles in the data may grab headlines, but they're not unique during an ongoing bull market. The overall trend is what matters most for stocks, and particularly, how that trend compares to expectations. Today, we see ample room for reality to surprise positively. Businesses are resilient, despite the many war-related concerns about oil, inflation and supply chain disruptions. To us, recent PMI data highlight the underappreciated strength of businesses and the global economy regardless of conflict in the Middle East.

Next, a look at consumer sentiment.

This Friday, the University of Michigan will release its preliminary consumer confidence data for May. This data gives investors a glimpse at how US consumers are feeling about the economy and their finances. April's reading at 49.8 was the weakest on record and continued a pessimistic trend that started in February. This reflects the impact of the conflict in the Middle East on consumer optimism. These recent readings are similar to those seen during last year's tariff-related correction and 2022's bear market. So, what is this data telling us? Historically, low consumer sentiment often happens during times of economic uncertainty. For instance, in 2022, consumers were worried about recession and inflation, and investors faced the challenges of a bear market. However, sentiment doesn't always reflect the true state of the economy. Feelings, after all, aren't reality, and it's not unusual to see a disconnect between how people feel and how the economy or markets perform. As we often mention, stocks themselves are considered one of the best leading economic indicators. And in spite of the war in the Middle East, globally, stocks have recently hit new all-time highs. While surveys like these may attract attention, they're not reliable predictors of what lies ahead. In fact, for investors, low sentiment can often signal opportunity. That's because markets thrive on the gap between expectations and reality, and when investors are pessimistic, there's a greater potential for reality to exceed expectations. That's a bullish signal for stocks.

Finally, the US housing market.

On Tuesday we'll get a fresh look at the US housing market, with the Census Bureau releasing new residential home sales for February and March. Sales of new single-family homes fell 17.6% from December to January—the sharpest decline since 2013, bringing sales to their lowest level since 2022. Looking at the bigger picture, 2025 was a tough year for the housing market. Annual existing home sales totaled just over 4 million— the weakest performance since 1995. Some investors may fear that weakness in the housing market will hold back stocks and the broader economy. But housing plays a smaller role in the economy than many think. In fact, the service sector makes up over three-quarters of the US economy. While housing costs are a significant portion of many household budgets, the sector's influence on economic growth and the current bull market is often overstated. And remember, surprises move markets most. The housing sector's struggles have been widely discussed since the pandemic, limiting any surprise power for stocks. And that's it for this episode of Three Things You Need to Know This Week. For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit fisherinvestments.com. Thanks for tuning in, and don't forget to hit like and subscribe.