Believe it or not, the way you feel about the stock market can actually affect its performance. The Consumer Confidence Index (CCI), a measure of how optimistic the average citizen feels about the present and future economy, is considered a valuable resource for predicting market trends. The premise is simple: if people feel pessimistic about the market, they generally sell stock, and the market indeed goes down. The reverse is also true. But how do you measure confidence?

The CCI is put together once a month by an organization called the Conference Board. The Conference Board conducts a survey of 5,000 U.S. households, asking questions about people’s opinions of the present economy, the possibility of future improvement, and the availability of jobs. Its members plot the results and look at, for example, how many people think the economy is “good” versus how many people thought so last month. The original point of reference is the year 1985, because during that year the U.S. economy was fairly “normal” – we weren’t in boom times or in a recession. By comparing the newest data to the previous month’s data, as well as to a fairly neutral reference point, the Conference Board can determine whether consumer confidence is declining or increasing and whether it’s higher or lower than you’d expect during an average year.

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