U.S. consumer sentiment deteriorated in October to its weakest in nine months as the first federal government shutdown in 17 years undermined Americans' outlook on the economy.
The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment fell to 75.2 in October, down from 77.5 in September. This was the lowest figure since January.
Consumer confidence posted a surprisingly small decline in early October despite widespread awareness of the government shutdown. The survey showed a modest pickup in household plans to buy cars and homes. However, things can quickly change if the impasse continues... further deterioration in consumer sentiment is possible.
It is important for investors to pay attention to these potential risks that are on the horizon.
Considering the tight correlation between consumer confidence and equity market returns in recent years, any event that has the potential to erode consumer confidence could result in losses in the equity market as well.