Connect with us

Investing

AMERICANS’ PERSONAL FINANCIAL SATISFACTION HITS 10-YEAR HIGH

Published

on

AMERICANS’ PERSONAL FINANCIAL SATISFACTION HITS 10-YEAR HIGH

Personal Financial Pleasure Rises on Stock Market Gains, Increased Job Openings 

Americans are experiencing their highest levels of personal financial satisfaction since the fourth quarter of 2006, according to the Q2 2017 AICPA Personal Financial Satisfaction Index (PFSi), released today. The 10-year high was primarily driven by three factors: the PFS 750 Market Index maintaining a record-high, job openings per capita climbing to a record-high and a significant decrease in the inflation measure from the prior quarter.

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 Q2 PFSi measured 24.1, a 7.6 point increase from the prior quarter. The increase was due to the slight uptick in the Personal Financial Pleasure index (1.4 points) and a substantial 6.2 point decrease in the Personal Financial Pain index.

“In conversations with our clients, we’ve been telling them to be aware of the long-term trend. People naturally overweigh the current situation and forget that it is part of a cycle,” said David Stolz, CPA/PFS and member of the AICPA PFS Credential Committee. “Americans shouldn’t let their present situation allow them to drift from their plan of reducing debt and adding to their savings. It’s always wise to save some acorns in the summer, because we know eventually winter is coming.”

The Personal Financial Pleasure Index, at 66.0, is up 1.4 points from the previous quarter and has continued its steady increase, setting a record for the third quarter in a row. The PFS 750 Market Index has been the biggest contributor to the Pleasure Index for several years, a trend that continued in Q2. Compared to the prior quarter, the information technology industry saw the strongest gains followed by consumer discretionary and health care, whereas energy and telecom experienced losses.

Of the four factors that make up the Pleasure Index, Job Openings per Capita Index experienced the largest increase over the previous quarter (5.3 points), reaching a record-high and moving into position as the second most important contributor to the Pleasure index. Job openings were highest among lower-paying sectors such as leisure/hospitality and accommodation/food services – both of which saw vacancies rise to all-time highs. In addition, government job openings are at their second-highest level of all-time, in part because the federal hiring freeze was lifted in April, resulting in many open positions. However, hiring was notably weak in the information technology, trade, transportation and financial activities sectors. According to the Federal Reserve’s Beige Book April 2017 Report, employers are having a harder time finding skilled workers to hire as the labor market continues to tighten.

The Personal Financial Pain Index, at 41.8, saw all four factors decrease from the previous quarter combining to drop the index 6.2 points which contributed to the overall improvement in the PFSi. The decrease from the preceding quarter was driven largely by a 16.5 point drop in the inflation index, the most volatile factor in the PFSi. The U.S. economy has continued to show signs of strength as it leaves the great recession behind. The Q2 inflation index, which preceded the Federal Reserve’s June announcement that the target interest rate will rise, has been held down in recent months by a price war in the wireless cell phone industry and falling prescription drug prices.

“Consumers should keep in mind that the Fed will likely continue to boost interest rates, making it more expensive for banks and ultimately, the consumer to borrow money,” said Robert A. Westley, CPA/PFS and member of the AICPA PFS Credential Committee. “In advance of future rate hikes, Americans should look to pay down their credit cards and other high-interest bearing debt as much as possible. Any future interest rate increase will result in higher monthly payments and therefore less disposable income and less financial satisfaction.”

Additional Findings from the Q2 2017 PFSi:

  • Real Home Equity per Capita is 7.1% above the prior year level, and 0.9% above the previous quarter level. It is still 16.5% below its 2006 all-time high. The changes in value have been due to increases in the market value of real estate which have exceeded increases in mortgages outstanding.
  • The AICPA Economic Outlook Index, which captures the expectations of CPA executives in the year ahead for their companies and the U.S. economy, was the only factor in the Pleasure Index that decreased from the previous quarter level, dropping 0.9 points. The survey was conducted in May.
  • Personal taxes, still the leading overall contributor to financial pain for the fourth quarter in a row, showed a 1.2 point decrease from the previous quarter and a 1.4 point decrease from the prior year level.
  • Underemployment, though still higher than it was prior to the great recession, continued to decrease dropping 5.3 points this quarter and 6.9 points year-over-year.
  • Loan delinquencies continued their downward trend at 2.7 points lower than the previous quarter and 9.9 points below the level a year ago. However, loan delinquencies today are still 23.8 points higher than they were in Q4 2006, the previous high of the PFSi.

Additional information on the PFSi can be found at: www.aicpa.org/PFSi.

Methodology 

The Personal Financial Satisfaction Index (PFSi) is the result of two component sub-indexes. It is calculated as the difference between the Personal Financial Pleasure Index and the Personal Financial Pain Index. These are comprised of four equally weighted factors, each of which measure the growth of assets and opportunities, in the case of the Pleasure Index, and the erosion of assets and opportunities, in the case of the Pain Index.

Investing

Wall Street Week Ahead: Investors weigh new stock leadership as broader market wobbles

Published

on

Wall Street Week Ahead: Investors weigh new stock leadership as broader market wobbles 1

By Lewis Krauskopf

NEW YORK (Reuters) – A shakeup in stocks accelerated by the past week’s surge in Treasury yields has investors weighing how far a recent leadership rotation in the U.S. equity market can run, and its implications for the broader S&P 500 index.

Moves this week further spurred a shift that has seen months-long outperformance for energy, financial and other shares expected to benefit from an economic recovery, while a climb in Treasury yields weighed on the technology stocks that have led markets higher for years.

The two-track market left the benchmark S&P 500 down for the week, and sparked questions about whether it could sustain gains going forward if the tech and growth stocks that account for the biggest weights in the index struggle.

So far this year, the S&P 500, which gives more influence to stocks with larger market values, is up 1.5%, while a version of the index that weights stocks equally is up 5%.

“That just tells us the gains are less narrow, more companies are participating, and I think that’s healthy,” said James Ragan, director of wealth management research at D.A. Davidson.

The focus on market leadership comes as investors are weighing whether the S&P 500 is due for a significant pullback after a 70% run since March, with the rise in long-dormant yields the latest sign of trouble for equities as it means bonds are more serious investment competition. The yield on the 10-year U.S. Treasury note this week jumped to a one-year peak of 1.6% before pulling back.

Economic improvement will be in focus in the coming weeks, including the monthly U.S. jobs report due next Friday, as will the country’s ability to ensure widespread coronavirus vaccinations, especially as new variants emerge.

Tech and momentum stocks helped drive returns in 2020 “when everyone was locked down and all they had was their computer,” said Jack Ablin, chief investment officer at Cresset Capital Management. “Now it seems with the vaccines, the stimulus and the prospect of reopening that we are looking out toward a recovery phase.”

The shift in the market this week is building on one that was fueled in early November, when Pfizer’s breakthrough COVID-19 vaccine news generated broad bets on an economic rebound in 2021.

Among the moves since that point: the S&P 500 financial and energy sectors are up 29% and 65%, respectively, against a nearly 9% rise for the benchmark index and 7% rise for the tech sector. The Russell 1000 value index has gained 16.5% against a 4.3% climb for its growth counterpart, while the smallcap Russell 2000 is up 34%.

“You definitely are seeing the reopening trade that has pretty much come alive here,” said Gary Bradshaw, portfolio manager of Hodges Capital Management.

Despite the gains, there remains “plenty of room for the reflation trade to run from a valuation perspective,” Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, said in a report this week. RBC is “overweight” the financials, materials and energy sectors.

Rising rates tend to be favorable for more cyclical sectors, David Lefkowitz, head of Americas equities at UBS Global Wealth Management, said in a note, with financials, energy, industrials and materials showing the strongest positive correlations among sectors with 10-year Treasury yields.

Still, how long the market’s reopening trade lasts remains to be seen. Investors may be reluctant to stray from tech and growth stocks, especially with many of the companies expected to put up strong profits for years.

Any setbacks with the economy or with efforts to quell the coronavirus could revive the stay-at-home stocks that thrived for most of 2020.

And with a GameStop-fueled retail-trading frenzy taking hold this year, banks and other stocks in the reopening trade may fail to draw the same attention from amateur investors as stocks such as Tesla, said Rick Meckler, partner at Cherry Lane Investments.

“There isn’t the pizzazz to those stocks,” Meckler said. “There rarely is a potential for stocks to make the kind of moves that big tech growth stocks have made.”

(Reporting by Lewis Krauskopf; editing by Richard Pullin)

Continue Reading

Investing

Exclusive: European officials urge World Bank to exclude fossil-fuel investments

Published

on

Exclusive: European officials urge World Bank to exclude fossil-fuel investments 2

By Kate Abnett and Andrea Shalal

WASHINGTON (Reuters) – Senior officials from Europe have urged the World Bank’s management to expand its climate change strategy to exclude investments in oil- and coal-related projects around the world, and gradually phase out investment in natural gas projects, according to three sources familiar with the matter.

In the six-page letter dated Wednesday, World Bank executive directors representing major European shareholder countries and Canada, welcomed moves by the Bank to ensure its lending supports efforts to reduce carbon emissions.

But they urged the Bank – the biggest provider of climate finance to the developing world – to go even further.

“We … think the Bank should now go further and also exclude all coal- and oil-related investments, and further outline a policy on gradually phasing out gas power generation to only invest in gas in exceptional circumstances,” the European officials wrote in the letter, excerpts of which were seen by Reuters.

The officials took note of the World Bank’s $620 million investment in a multibillion-dollar liquified natural gas project in Mozambique approved by the Bank’s board in January, but did not call for its cancellation, one of the sources said.

The World Bank confirmed receipt of the letter but did not disclose all its contents. It noted that the World Bank and its sister organizations had provided $83 billion for climate action over the past five years.

“Many of the initiatives called for in the letter from our shareholders are already planned or in discussion for our draft Climate Change Action Plan for 2021-2025, which management is working to finalize in the coming month,” the Bank told Reuters in an emailed statement.

The Bank’s first climate action plan began in fiscal year 2016.

The United States, the largest shareholder in the World Bank, this month rejoined the 2015 Paris climate accord, and has vowed to move multilateral institutions and U.S. public lending institutions toward “climate-aligned investments and away from high-carbon investments.”

World Bank President David Malpass told finance officials from the Group of 20 economies on Friday that the Bank would make record investments in climate change mitigation and adaptation for a second consecutive year in 2021.

“Inequality, poverty, and climate change will be the defining issues of our age,” Malpass told the officials. “It is time to think big and act big in finding solutions,”

He said it was also launching new reviews to integrate climate into all its country diagnostics and strategies, a step initiated before the letter from the European officials, said one of the sources.

(Reporting by Andrea Shalal in Washington and Kate Abnett in Brussels; Additional reporting by Valerie Volcovici in Washington; Editing by Matthew Lewis)

Continue Reading

Investing

GameStop rally fizzles; shares still register 151% weekly gain

Published

on

GameStop rally fizzles; shares still register 151% weekly gain 3

By Aaron Saldanha and David Randall

(Reuters) – GameStop Corp closed 6% lower on Friday as an early rally fizzled but the stock finished the week 151% higher in a renewed surge that left analysts puzzled.

The video game retailer’s shares closed at $101.74 after retreating from a session high of $142.90. The weekly rocket ride higher came despite a broader market selloff that sent the benchmark S&P 500 <.SPX> down 2.5% over the same time.

Analysts have struggled to find a clear explanation, and some were skeptical the rally would have legs.

“You might be able to make some quick trading money and it could be a lot of money, but in the end, it’s the greater fool theory,” said Eric Diton, president and managing director at The Wealth Alliance in New York. The theory refers to buying stocks that are over-valued, anticipating a “greater fool” will buy them later at a higher price.

Analysts mostly ruled out a short squeeze like the one that fueled GameStop’s rally in January, when individual investors using Robinhood and other apps punished hedge funds that had bet against the stock, forcing them to unwind short positions. Many GameStop buyers took their cues from online investment forums on Reddit and elsewhere.

Short interest accounted for 28.4% of the float on Thursday, compared with a peak of 142% in early January, according to S3 Partners.

Options market activity in GameStop, which has returned to the top of the list in a social media-driven retail trading frenzy, suggested investors were betting on higher prices, higher volatility, or both.

Refinitiv data showed retail investors have been buying deep out-of-the-money call options, which have contract prices to buy far higher than the current stock price.

Many of those option contracts were set to expire on Friday, meaning handsome gains for those who bet on a further rise in GameStop’s stock price.

Call options, profitable for holders if GameStop shares hit $200 and $800 this week, have been particularly heavily traded, the data showed. GameStop’s stock traded this week as high as $184.54 on Thursday, far below the $483 intraday high it hit in January.

“The actors are looking to take advantage of everything they can to maximize their impact and the timing is important,” said David Trainer, chief executive officer of investment research firm New Constructs. “The options expiration will contribute to their strategy on how to push the stock as much as they can and maximize their profits.”

Bots on major social media websites have been hyping GameStop and other “meme stocks,” although the extent to which they influenced prices was unclear, according to analysis by Massachusetts-based cyber security company PiiQ Media.

The U.S. Securities and Exchange Commission (SEC) on Friday suspended trading in 15 companies because of “questionable trading and social media activity.” GameStop was not among them.

The 15 companies were in addition to six stocks it recently suspended due to suspicious social media activity.

Robinhood said it has received inquiries from regulators about temporary trading curbs it imposed during a wild rally in shorted stocks earlier this year.

Other Reddit favorites were also lower on Friday, with cinema operator AMC Entertainment down 3.4%, headphone maker Koss off 22.4% and marijuana company Sundial Growers down 2.9%.

(Reporting by Aaron Saldanha in Bengaluru; additional reporting by Caroline Valetkevitch in New York, and Devik Jain and Sruthi Shankar; Writing by David Randall; Editing by Alden Bentley, Shinjini Ganguli, Anil D’Silva, Dan Grebler and David Gregorio)

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Call For Entries

Global Banking and Finance Review Awards Nominations 2021
2021 Awards now open. Click Here to Nominate

Latest Articles

Newsletters with Secrets & Analysis. Subscribe Now