Americans were feeling a lot of personal financial satisfaction at the end of the second quarter — thanks mainly to June’s terrific stock market performance — and less pain than at any time since before the recession, the American Institute of CPAs reported Thursday.
The AICPA’s second quarter personal financial satisfaction index was down slightly from the January-to-March quarter at 37.8, but still close to the record high of 38.6 (revised) set during that period.
The PFSi is calculated as the Pleasure Index minus the Pain Index, with positive readings signaling that Americans are feeling more financial pleasure than pain. In the second quarter, the Pain Index’s 0.9 point increase outweighed the pleasure index’s 0.1 point increase.
The bull market, abundant job openings and steadily rising home equity contributed to Americans’ near-record financial pleasure, while their pain receded in the wake of a downward trend in delinquencies on loans and underemployment, which reached its lowest level on record in a tight labor market.
The Pleasure Index, which comprises four equally weighted components, measured 74.1 in the second quarter, within shouting distance of its all-time high of 75.0 set in last year’s third quarter.
The most improved component over the last quarter was the PFS 750, the AICPA’s proprietary stock index of the 750 largest companies trading on the U.S. market adjusted for inflation and per capita.
With a second quarter reading of 91.9, the PFS 750 continued as the leading contributor to both the Pleasure Index and the PFSi.
The S&P 500, the Dow Jones industrial average and the Nasdaq composite index were all close to all-time highs at the end of June. Their performance capped a strong first half of 2019 and represented a big rebound from May’s market downturn.
Notwithstanding the good news, the AICPA offered investors a word of caution, noting that the improvement relied on just five digital economy companies for a third of the gains over the past quarter.
“Having the bulk of your investments in one or two stocks is a risky strategy because of their individual volatility,” Mark Astrinos, member of the AICPA’s personal financial specialist credential committee, said in a statement.
“Pullbacks are a regular occurrence for risk assets, so it is crucial to not put all your eggs in one basket — or in this case, all your investments in one company or industry. Instead, build a financial plan with a diversified and balanced portfolio that will lend itself to smoother gains and downsize risk over a longer time horizon.”
The Real Home Equity Per Capita Index, based on January data, was 3.5% above the prior year value and 1.8% ahead of the previous quarter level.
The Job Openings Per Capita Index, the second largest contributor to the Pleasure Index, decreased 2.4 points to 84, based on April data. This was only the factor’s second decrease in three years.