As noted earlier, we’ll be getting a consumer confidence reading this week, with he Conference Board’s gauge due out on Tuesday. The more closely watched measure, though, is the one put out by the University of Michigan. In the most recent measure, the level of confidence is at 65 percent.

While that all seems well and good, famously contrarian economist David Rosenberg at Gluskin Sheff says there’s more than meets the eye for what amounts to a near-euphoric reading. Investors take note:

“What a classic contrary indicator it truly is! It reveals just how much good news is priced in — even when the macro news isn’t so good. Look at this past month — full time jobs: down. Industrial production: down. Real wages: down. Retail sales: down. In fact, over the past three months, 46 percent of the incoming data have come in below expectations and barely more than 40 percent have managed to top consensus views.

“OK, enough of that. Here’s what you need to know. In the past, when the U of M equity reading was north of 60%, the S&P 500 was basically flat three and six months out and down nearly 3% a year later. But when the metric is 40% or lower, when there is nothing but bad news being discounted, the stock market was up over 5% in a three-month span, up 16% in six months’ time and more than 30% a year out.”

Morale of the story: Optimism can be your enemy as an investor.

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