If you’re worried about the U.S. economy, you’re not alone. According to the Conference Board, a private research group, consumer confidence fell in August by the most in 10 months.
Lynn Franco, director of economic indicators at the Board’s Research Center, said, “Consumers were more apprehensive about business and employment prospects.”
The readings on three sub-sections really caught my attention:
- The number of Americans who expect their incomes to drop during the next six months jumped to a 10-month high of 16.8%, from 14.9% in July.
- 52.3% of those surveyed said the job situation is bad or getting worse.
- The percentage who expected the economy to improve in the next six months fell to 16.5% in August, from 19% in July. And the percentage who said conditions will get worse rose to 17.7%, the most since October.
That dour outlook will undoubtedly carry over into the November elections. But I consider it a much-more-important indicator for retail sales, especially right now as we’re entering the two most-important retail periods of the year: Back-to-school and Christmas.
If American consumers aren’t confident, they are not going to spend. And that has huge implications for our economy and our stock market.
I don’t blame Americans for being cautious. But it isn’t that way around the rest of the world … especially in Asia.
MasterCard (MA), which I am sure you would agree knows a thing or two about consumer spending habits, released the new results from its Worldwide Index for Consumer Confidence.
It Paints a Very Different Picture
for Asia’s Consumers!
The company has surveyed Asian consumers 39 times going all the way back to 1993, and is the most-comprehensive and longest-running consumer confidence survey in Asia.
Its index score is calculated with zero as the most pessimistic, 100 as most optimistic and 50 as neutral.
Despite concerns about slowing growth in China and the European debt crisis, the index showed that overall consumer confidence in Asia is rising. The index increased from 52.1 in 2011 to 57.2 now.
The sub-sets of the index showed even more promise where increases were recorded across all key indicators:
- Income (from 64.5 to 71.9)
- Employment (49.3 to 54.0)
- Economy (49.3 to 51.8)
- Quality of life (49.6 to 51.7)
- Stock market (47.9 to 56.5)
Nine of 14 Asia markets showed an improvement in consumer confidence, up from only five countries last year. Consumers were the most confident in India (82.1), mainland China (77.4), Vietnam (77.2) and Thailand (75.8).
The countries showing the largest jump in confidence were Hong Kong, rising by a whopping 21.9 points, followed closely by South Korea (up 21.4 points), Malaysia (up 17.1 points) and New Zealand (up 15.3 points).
How can Asian consumers be so confident when other parts of the world are so dire?
Simple: The continued growth of domestic consumption all over Asia.
“The strength of the domestic markets (is) sustaining growth with home-grown demand,” said Yuwa Hedrick-Wong from MasterCard in a statement.
I want you to burn the phrase “home-grown demand” into your investment mind. I believe that simple concept can put a ton of stock market profits into your pocket.
Here’s why …
The Chinese economy is undergoing an intentional, MONUMENTAL transformation from an export-dependent manufacturer of low-margin trinkets to a consumption-driven economy powered by its own internal growth.
You see, China’s leaders don’t like being dependent on the West for its exports. So it is intentionally focusing on growing its domestic demand.
China’s 12th Five-Year Plan (2011-’15) prioritized more equitable wealth distribution, increased domestic consumption, and improved social infrastructure and social safety nets. The plan is representative of China’s efforts to shift its emphasis toward domestic consumption.
Wages in China have been growing by around 12% a year in real terms over the last decade, and they are spending that money.
So my suggestion for you is …
Invest in the Companies That Cater
to the Boom in Asian Consumer Spending
Furthermore, I suggest you consider companies that are based in the United States. I’m talking about companies that make the products or provide the services you may use yourself.
Of course, only a select few have the ability to prosper regardless of what happens to the U.S. economy. These are the gems that have a foothold in Asia and are bound soar once the Asian consumers’ spending spree fully kicks into high gear.
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