Americans’ personal financial satisfaction jumped to an all-time high in the third quarter on the strength of the job market and continued stock market growth, the American Institute of CPAs reported Thursday.
The new high was the fifth consecutive quarter AICPA’s personal financial satisfaction index set a record.
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 32, a 3.1-point increase from the July-to-September period, its biggest quarterly increase since the second quarter of 2017. The increase owed to a two-point quarter-over-quarter gain in the pleasure index, which was boosted by a slight drop in the pain index.
The AICPA reported that the pleasure index, which comprises four equally weighted factors, was up two points from the second quarter to 73.9, setting an all-time record for the seventh quarter in a row. Its biggest contributor, the PFS 750 Market Index, now accounts for 31.5% of its total value. This proprietary stock index includes the 750 largest companies trading on the U.S. market, adjusted for inflation and per capita.
The PFS 750 Market Index reached 93 in the third quarter, 5.3 points above its second quarter level. Its value was determined by the stock market’s closing position at the end of the first trading day of fourth quarter, Oct. 1. Since then, the market has pulled back, and if it does not rebound, the resulting drawdown will be captured in the fourth-quarter index.
“While it is great that the stock market’s record performance is bolstering Americans’ financial satisfaction, it’s crucial for investors to keep in mind that pullbacks, like the one we’ve seen recently, are a regular occurrence for risk assets,” Robert Westley, a member of the AICPA’s personal financial specialist credential committee, said in a statement.
“Short-term volatility and pullbacks are the price we pay for riskier assets that provide a higher return over the long term. Worried investors should build confidence with a strong financial plan that includes a diversified portfolio designed to navigate market volatility and meet their personal financial goals.”
The Job Openings Per Capita Index, the pleasure index’s second largest contributor, increased 1.1 points over the previous quarter as job openings set a record in August. With 7.1 million job openings for 6.2 million job seekers, the tight labor market saw 3.6 million workers voluntarily leave their jobs in August, the fastest pace in 17 years, according to the Bureau of Labor Statistics.
The other two components of the pleasure index also rose. The AICPA Economic Outlook Index, which captures CPA executives’ expectations in the year ahead for their companies and the U.S. economy, was 3.5% higher than the prior year level and flat vis-à-vis the previous quarter.