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.

Pleasure Index

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.

Pain Index

The second quarter 0.9 point rise in the Personal Financial Pain Index, to 36.3, came on increases in inflation and taxes. The Inflation Index led the increase over the preceding quarter, jumping to 36 from 31.

The report noted that inflation is the most volatile factor contributing to the PFSi, and with absolute levels so low, small changes result in large percentage gains.

“With the potential that the Fed may lower rates on the horizon, Americans should revisit the inflation assumptions used in their financial plans, especially if they are in, or close to, retirement,” Astrinos said.

The Federal Reserve has indicated a possible rate cut in the future, possibly this month.

“While rates are holding steady, now is a good time to review your investments and make sure they are at a minimum keeping up with inflation. Otherwise, it may be time to update your portfolio.”

Pain from personal taxes increased 1.5 points over the previous quarter to 49.4, the sixth quarter to reflect the effect of the 2017 tax law, the report noted. Compared with the year-ago level, pain from taxes is up 2.1 points and is now only 2.6 points lower than the reading of 52.0, recorded in the 2017 fourth quarter, before the law went into effect.

The personal taxes value uses information from the Bureau of Labor Statistics on income tax, tax on realized net capital gains and taxes on personal property. Pain from personal taxes continues to be an outsize contributor to financial pain.

In fact, over the last three years, the personal taxes factor has been the largest contributor to the Personal Financial Pain Index for 10 of 12 quarters, according to the report.

Underemployment in the second quarter, at 31.2, was 3.3% lower than the prior quarter and down 9.3% from the year-ago level. This BLS-calculated factor is a combination of full-title total unemployed numbers, all marginally attached workers and total number of workers employed part time for economic reasons.

The underemployment factor is now tied for its all-time low, last achieved in 2001. For comparison, its peak value of 84.3 was set in the fourth quarter of 2009.

Delinquencies on loans, at 29, was down 1.7 points from the first quarter and down 8.7 points from a year ago. The report noted that improvements were somewhat more heavily weighted toward all loans on the annual comparison, but mostly related to mortgages for the quarterly comparison.

It said this loan delinquency factor was at its lowest level since the end of 2007, but was still slightly above what was typical from 1994 through 2003.

— Check out Bob Doll Checks In on His 10 Predictions for 2019 on ThinkAdvisor.