The Falling Stock Market Is Weighing Down Americans’ Financial Satisfaction — Are You Feeling It?

Here's a look at what the AICPA's study revealed.
  • The AICPA’s Personal Financial Satisfaction Index fell in the fourth quarter of 2018 for the first time in almost two years.
  • The driving factor was a major decline in the stock market that dragged down the Financial Pleasure Index.
  • Although the Financial Pain Index was also down, it decreased less than the Pleasure Index.

The American Institute of Certified Public Accountants updated its Personal Financial Satisfaction Index on Thursday to reflect the final three months of 2018. Results revealed a reading of 30.9, declining for the first time since the fourth quarter of 2016 and breaking a streak of record highs for five straight quarters.

The index shows that although the financial pain people are feeling declined slightly from third quarter 2018, their pleasure dropped significantly more. Here’s more on what the survey revealed about American finances.

Financial Lives Feature Less Pain, but Even Less Pleasure

The PFSI consists of the AICPA’s twin indices meant to reflect how people’s financial lives are going, subtracting the reading from its Pain Index from its Pleasure Index for the final number. As such, although the Pain Index was down 2.6 points, that was outpaced by a 4.1 point drop in the Pleasure Index.

The main culprit? The major sell-off in the stock market. The Pleasure Index has clocked gains in 11 straight quarters, but it was pulled down during the holiday season as the PFS 750 Market Index — a market index consisting of the largest 750 public companies trading on the American market — lost 13.4 points, a 14.5 percent loss.

That decline meant that the factor representing the largest contributor to the Pleasure Index for the first time since second quarter 2001 was the number of job openings per capita, which moved ahead of the stock market despite a 0.3 percent decline in third quarter 2018.

Find Out: 20 Things to Do in a Falling Stock Market

The Pain Index, meanwhile, would seem to indicate that the real reason people might be less satisfied right now is because they’re less happy, not sadder. The Pain Index had three different categories drop from third quarter 2018. The inflation index plunged 17 percent, marking the largest contributor to the drop in the Pain Index, and loan delinquency dropped from third quarter 2018 by 6.9 percent.

Personal Taxes Are the Largest Contributor to Financial Pain

The largest contributor to financial pain cited in the index is now personal taxes, though that comes despite the factor declining from the same time last year by 8.7 percent.

Related: See Who Will Be Paying More in Taxes This Year — It Might Be You

Economy Is Strong, Just Not as Strong for Investors

Much has been written about the lengthy bull run of the stock market that appears to finally be reaching an end point. As such, it might not be surprising that the main driver of the decline appeared to be investors coming back to earth rather than a distinct reversal of broader economic trends.

“The recent stock market decline is a good reminder to focus on the long-term goals of your financial plan, and don’t let yourself be influenced by the prevailing financial winds,” said Dave Stolz, a member of AICPA’s PFS Credential Committee. “Even with the recent market turbulence, economic conditions overall in the US remain strong.”

Political Impacts on Investments

However, if the declining stock market begins to create a ripple effect into other parts of the economy — or if headwinds like slowing growth in China, the ongoing trade war or the government shutdown begin to have greater impact — it’s entirely possible that future updates will start to reflect more pain among Americans.

But for now, the PFSI would seem to indicate that — although things aren’t getting any worse — they’re no longer getting any better, either.

See what experts predict will happen to the economy this year.

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