Americans experienced a record level of personal financial satisfaction in the third quarter, the American Society of CPAs reported Thursday.

Stock market gains and abundant job availability propelled the AICPA’s third-quarter Personal Financial Satisfaction Index past its previous high reached in the 2006 fourth quarter, just before the recession.

The AICPA began issuing the PFSi quarterly in January 2015, with the data for the index tracking back to 1994.

The PFSi is calculated as the Personal Financial Pleasure Index minus the Personal Financial Pain Index, with positive readings indicating that Americans are feeling more financial pleasure than pain.

The third quarter PFSi measured 25.9, up 2.6 points from the previous quarter. The increase was due to a 2.1-point gain in the pleasure index and a 0.5-point loss in the pain index.

“By and large the pleasure index factors have been trending up for some time as we have mostly recovered from the great recession,” Mark Astrinos, member of the AICPA PFS credential committee, said in a statement.

“While we all benefit from the surge of capital markets and real estate growth, it’s prudent that our financial health safeguards remain in place. This means ensuring that you rebalance portfolios to reduce risk and maintaining adequate cash reserves for when economic times are more challenging.”

A big majority of retail investors in a survey released this week expressed confidence in U.S. capital markets.

Pleasure Increases

The pleasure index, made up of four equally weighted factors, each of which measures the growth of assets and opportunities, set a third consecutive quarterly record, at 68.1, up 2.1 points from the second quarter.

The Real Home Equity Per Capita Index, based on data issued for April, experienced the largest increase over the previous quarter, up 4.8 points to 65, though it is still 16.3% below its 2006 all-time high.

According to the AICPA, the changes in home equity have been due to increases in the market value of real estate exceeding increases in mortgages outstanding.

The PFS 750 Market Index, up two points from the second quarter to 84, remained the biggest contributor to the pleasure index, a trend dating to 2009. The U.S. economy has continued to expand as corporate earnings improve and interest rate policy remains accommodating.

The strongest sectors have performed well this year. The banking sector led returns, gaining 44%, and the aerospace and defense sector gained 42% — not surprising, the AICPA noted, given tensions over North Korea.

The Job Openings Per Capita Index, up 3.6% at 70, was the second largest contributor to the pleasure index in the third quarter. At a total of 6.2 million, overall job openings are setting records, the AICPA noted, with strongest job growth in food services, professional and business services, and health care.

The fourth component of the pleasure index, the AICPA Economic Outlook Index, came in at 53, 16.3% higher than the year-ago third quarter and 3.6% above the second quarter level. The index, which was conducted in the first half of August, captures the expectations of CPA executives in the year ahead for their companies and the U.S. economy.

“As the stock market drives American’s financial satisfaction to new all-time highs, many are beginning to question whether this trend is sustainable,” AICPA PFS credential committee member Robert Westley said in the statement.

“As individuals begin to fear a pullback, it’s important to keep in mind that the stock market is largely unpredictable and any attempts to time the market often prove to be ineffective at best, and injurious at worst.”

Westley said an investor’s best defense against this unpredictability was to have a solid financial plan, irrespective of how the market is performing. “It’s key to your financial plan to align your portfolio with your personal financial goals and their corresponding time horizons.”

Pain Recedes

Two components of the Personal Financial Pain Index, which comprises four equally weighted factors, combined to cause it to drop 0.5 points from the second quarter to 42.1, which contributed to the overall improvement in the PFSi.

Loan delinquencies fell by 2.9 points to 40, and inflation fell by two points to 34.

The AICPA said the current 3.9% reading of delinquencies on mortgages was well below the 11.3% peak delinquency rate for mortgages set in the spring of 2010, but still above the 2.1% that was typical between 1994 and 2003.

It said loan delinquencies could increase in the fourth quarter, owing to the recent onslaught of hurricanes and wildfires across the U.S. that left more damage and affected a much larger area than Hurricane Katrina did in 2005.

As a comparison point, the AICPA said Katrina ultimately led to a 34% increase in delinquencies in the areas it damaged, and noted that Fannie Mae, Freddie Mac and the Federal Housing Authority have all announced a temporary moratorium on any actions as a result of mortgages going unpaid in storm-devastated areas.

As for the inflation index, the current value is 34 based on the Federal Reserve’s August level, down by 5.5% from 36 in second quarter and 42.4% above last year’s level.

Inflation is the most volatile factor contributing to the PFSi, according to the AICPA. With absolute levels so low, small changes result in large percentage gains, such as the 42.4% increase that still leaves it below the Fed’s target.

Personal taxes continued to lead all contributors to financial pain for the sixth quarter in a row, clocking in at 55, a 1.9-point increase from the second quarter and a 0.8-point increase from the prior year level.

Underemployment in the third quarter, at 39 points, was 2.8% higher than the previous quarter level, but 13% below the same period last year. This compares with its peak value of 84.3 in the fourth quarter of 2009. This component of the pain index is still about 1.8% above its average value before the recession.

— Check out Investors Expect Robust Q4 Market Close: E-Trade on ThinkAdvisor.