War in Ukraine. Outsized inflation. Supply chain disruptions. A lingering pandemic.
Today’s global upheavals all contribute to a sense of general economic anxiety among investors and, more broadly, the American public. The University of Michigan’s Consumer Sentiment Index (opens in new tab) — a metric that gauges how consumers view the economy and their own financial prospects — is at its lowest point since 2011.
But is the worry misplaced?
A quick drive past a gas station might suggest it isn’t, but it also wouldn’t describe the full picture. The overall, sustained health of the economy is a reminder that we must view events with proper perspective.
Consumer sentiment currently appears to be running counter to other prominent indicators. For example:
- More people are employed as the unemployment rate ticked down to 3.6% in March.
- Wage growth is at its best rate in years.
- The stock market’s returns continue to grow at the same healthy rate they have since the middle of the last century.
These factors should not blind us to what is going on in the world. Unquestionably, the war in Ukraine is a tragedy and creating global waves, from humanitarian crises to gas pump pains. Certainly, too, inflation and the supply chain are factors that lead to volatility in the markets.
But again, we come to perspective. In the past 20 years that I’ve been a wealth adviser, for example, I’ve witnessed a vast range of economic disruptions — 9/11, the tech bubble, the Iraq War, a debt downgrade, a housing crisis and the massive ensuing recession, energy fluctuations and… well, the list could go on for quite a while. Through it all, we’re still standing — still thriving.
How, then, do we explain the lagging consumer sentiment? A few thoughts that immediately spring to mind:
1. We’re always connected
It’s not time for a Luddite screed, but there is little doubt that many Americans (maybe it’s fair to say most?) lead an always-online lifestyle that is complemented by a 24/7 news cycle — whether they want to hear the day’s headlines that often or not. Studies routinely find a link between poor mental health and overexposure to social media (opens in new tab).
Does this mean investors and consumers should throw their modems in the trash and block out negative news stories? Of course not — the world faces serious problems and an informed public can make a difference. But by regularly “unplugging,” taking the time to get away from unproductive online stories, arguments and biased pundits, it can easily create more brain space that encourages financial thinking and decisions based on facts, rather than emotion.
2. We neglect our history
There is always a crisis in the world that holds the potential for turbulence in the market, even if it isn’t particularly notable on our shores. As discussed earlier, however, there is a long line of events that have impacted our economy but we were able to rebound from – a list that stretches back to before there was even a United States.
Yes, it’s unreasonable to expect everyone to recall a banking panic from the late 19th century, but the Great Depression of nearly a century ago, gas shortages in the 1970s and the more recent 2008 financial crisis remain well-known examples of times that we weathered worse economic periods. Learning and remembering our history are crucial factors to building the perspective that helps us place current events in better context.
3. It’s human nature
While many of us are glass-full types, overall, we’re a negative species, with a tendency to focus more on negative interactions, memories and news. In prehistoric times, this behavior might have been a survival mechanism, but today, research suggests it can adversely impact decision-making (opens in new tab) and relationships.
Often, the advisers at my firm play the role of psychologist, not in a medical sense, but by digging into and breaking through clients’ negative financial attitudes and behaviors. Today, it’s simply part of the job, just as it is to maintain that one important sense: perspective.
Matt Helfrich is President of Waldron Private Wealth (opens in new tab), a boutique wealth management firm located just outside Pittsburgh, Pa. He leads Waldron's strategic vision, brand and value proposition and overall culture of the firm. Since 2002, Helfrich has served in a number of roles including: Chief Investment Strategist and Chief Investment Officer, where he was instrumental in creating and refining Waldron's investment discipline.
What Are Home Heating Oil Prices Across the U.S.?
And how high will home heating oil prices go as we head deeper into winter?
By Ben Demers • Published
Stock Market Today: Stocks Spiral After Strong Data Sparks Fed Fears
Data on the services sector and factory activity came in stronger than expected, pointing to a resilient U.S. economy.
By Karee Venema • Published
4 Steps to Take if You Lose Your Job Near Retirement
Being let go from a job later in life can lead to financial disaster, but there are some things you can do to help lessen the damage.
By Tony Drake, CFP®, Investment Advisor Representative • Published
Divorcing a Trustee: Do You Need a Prenuptial?
For any corporate trustee you choose, there should be some minimum requirements, and it’s best to check its reputation ahead of time to find out if its trust relationships end amicably.
By Timothy Barrett, Trust Counsel • Published
5 Mistakes Veterans Most Often Make When Filing for Disability Benefits
Our military takes care of us, and when they are injured, sick or unable to work, the VA can help take care of them. For a successful benefits claim, here are some mistakes to avoid.
By Brett Buchanan • Published
Don’t Poke the Bear! How to Respond to Angry Customers
Arguing, doubling down and refusing to negotiate could make matters worse, so it’s best to aim for a win-win solution. And if that doesn’t work…
By H. Dennis Beaver, Esq. • Published
Doing Your Retirement Income Planning in the Right Order Matters
A strong retirement income strategy considers many factors, including the retiree’s unique financial resources and needs. How and when you tackle them is critical.
By Jerry Golden, Investment Adviser Representative • Published
How Parents Can Teach Their Kids About Cryptocurrency
Starting with explaining the concept of money to begin with can help them grasp the concept of digital currencies.
By Neale Godfrey, Financial Literacy Expert • Published
How Do You Overcome Stage Fright? These 6 Tips Can Help
Many people fear public speaking more than they fear death, yet advancing professionally could depend on whether you make a good impression when you step up to the microphone.
By H. Dennis Beaver, Esq. • Published
2 Ways Retirees Can Defuse a Tax Bomb (It’s Not Too Late!)
If you’re retired and find yourself sitting on a “tax bomb,” you may think there’s nothing you can do. But two strategies could seriously reduce your taxes in retirement.
By David McClellan • Published