Against a backdrop of plentiful jobs and an early-year surge in the stock market, Americans' financial happiness has hit a new high.
The American Institute of CPA's quarterly Personal Financial Satisfaction Index, released Thursday, is up 11% from the previous reading and 27% higher than a year ago.
"People are feeling more comfortable with their finances," said Michael Landsberg, a CPA and member of the AICPA's executive committee. "They're confident in their jobs, they have more money to meet their obligations, and they realize the economy is still chugging along."
Landsberg warns, however, that getting too comfortable could lead to trouble.
"You don't want to be too confident and overspend, because at some point things will turn," he said.
After dipping at the end of 2018 due to a sharp decline in stock prices, the AICPA's index stood at 36.1 for the quarter ended March 31, marking the highest number in the 20-plus years tracked. The lowest reading was in 2011, when it hit negative 41.35.
In simple terms, the index is a combination of two opposing groups of data: "pleasure" indicators that measure the growth of assets and opportunities, and "pain" points that measure their erosion. The latest reading showed a 2.4-point increase on the pleasure side and a 1.3-point dip on the pain side.
Prior to the index's bottom in 2011, it had peaked in the third quarter of 2007. At that point, the largest contributor to the pleasure side of the equation was home equity, which tanked when housing prices slid, delinquencies surged and the Great Recession gripped the country.
Since the index began climbing back from its 2011 all-time low, it has shown a quarterly increase all but four times.
This time, the factors that contribute to the pain reading have all improved from a year ago. Unemployment is at 3.8%, down from 4% a year ago. In fact, job openings have exceeded the number of unemployed people since March 2018.
Additionally, more Americans are paying their mortgages on time than they have in almost two decades. In the fourth quarter of 2018, the delinquency rate on such loans was 4.06%, the lowest level since the first quarter of 2000, according to the Mortgage Bankers Association.
Inflation also has slowed, running at 1.7% in the first quarter, which is below the Federal Reserve's 2% target. And, pain from taxes also is slightly down year over year.
Nevertheless, the party will end at some point. With stock market performance driving the pleasure side of the index's equation, a correction or sustained lower prices could send consumers' comfort level plummeting.
"You'll see a lot of parallels — as the stock market goes, so does personal financial satisfaction," Landsberg said. "When people see their account balances slip over a month or two, that can affect their confidence."
Year-to-date, the is up about 16.8%, closing at 2,927.25 on Wednesday. Since its bottom in March 2009, the index is up 282%, despite a number of corrections along the way.
Additionally, the economic outlook portion of the index — which captures the expectations of CPA executives for the year ahead — is largely unchanged from the last quarter, but is down 8.2% from a year ago.