The Markets Thanksgiving is in the air! On Thursday, U.S. investors may find themselves giving thanks to the bull market. Year-to-date, the Standard & Poor’s 500 Index, Dow Jones Industrial Average, and Nasdaq Composite have all gained more than 20 percent with dividends reinvested. The MSCI World Index also is up 20 percent year-to-date. Bond markets have rallied, too. U.S. government bond yields have dropped since January, and prices have risen. Not all asset classes have packed an oomph, but investors are feeling optimistic, reported Michael Mackenzie of the Financial Times. Ben Levisohn of Barron’s expressed some skepticism about the current level of optimism. “If you believe the current narrative, everything is right with the world. By cutting interest rates three times, the Federal Reserve has averted a recession. And with the U.S. and China slowly making progress on a trade deal, capital spending could revive and boost the economy. And right on time, the S&P 500 index hit a new all-time high, seemingly confirming this rosy narrative…Strangely, market sentiment appears to be getting better even as the economic data appear to be getting worse.” He’s not wrong. Economic data suggest U.S. and Chinese economies have begun to experience negative effects related to the two-year-old trade war. Reuters reported economic growth in China has slowed to a 30-year low. Growth in the United States has slowed, too. While many remain optimistic about progress in resolving the U.S.-China trade dispute, Barron’s Nicholas Jasinski spoke with the chief investment officer of an international wealth management firm, who commented, “Our view of U.S. and China is that it’s a competition that’s going to go on for a generation economically, diplomatically, militarily.” Last week, major U.S. indices finished lower on concerns about trade talk progress. Happy Thanksgiving! We’re thankful for you.
Understanding family attitudes towards money may improve financial decisions and reduce financial stress. Money beliefs are often passed down from generation to generation, along with great grandma’s quilts, ancestral photos, and family culture.1 Researchers call these inherited money mindsets ‘money scripts,’ which are categories of belief associated with problematic financial decisions that create chronic stress.1,2 The authors of Wired for Wealth explained:3 “A money script is not necessarily wrong, but neither is it necessarily right. Our scripts are often skewed, exaggerated, or one dimensional, consisting of incomplete or partial truths. They are usually highly contextual, true in one circumstance but false in many others…Since our money scripts are mostly unconscious, we don’t question their accuracy or examine the degree to which they are true and work for us, yet we continue to act on them as if they were entirely true.” Understanding the scripts that underlie financial choices may help improve decision-making and reduce financial stress. Researchers at the University of Kansas studied four factors that encompass a variety of money scripts: Money avoidance: Some money avoiders believe they don’t deserve to have money. Others think money is bad. Either way, money can be a source of fear, anxiety, or disgust. Money avoiders often sabotage their financial success, may choose to not spend money on reasonable and essential items, or may give money away so they have as little as possible.1, 2 Money worship: Money worshippers share a “belief that more money will solve all of life’s problems and bring happiness…”2 The reward of more money becomes a carrot never quite reached. These beliefs have been associated with compulsive hoarding, unreasonable risk-taking, gambling, overspending, compulsive buying, and other destructive financial behaviors.1,2 Money status: People whose beliefs register on this scale adhere to the idea that money confers status. They see a clear distinction between socio-economic classes, and their sense of self-worth is often linked to net worth. Status scripters tend to equate success with money and may pretend to have more money than they do to appear successful.2 Money vigilance: The vigilant believe it is important to work and save. They are watchful, frugal, and concerned about finances. While these traits can support healthy financial decisions, the vigilant are often anxious about money matters and wary of financial risk. Consequently, their ability to enjoy the benefits and security of money may be limited.2 Within these categories, the 10 money scripts that result in chronic stress are:3
- More money will make things better. Generations of families with this script may spend their lives accumulating more.
- Money is bad. Grounded in the belief money makes people bad or unhappy, this script may lead to financial self-sabotage.
- I don’t deserve money. This belief may accompany an inheritance or windfall. It may also lead to people earning below their potential.
- I deserve to spend money. Everyone does. However, when this leads to overspending it creates financial problems.
- There will never be enough money. Fear and anxiety may cause people to work long hours, neglect relationships, and fail to enjoy the benefits of their labor.
- There will always be enough money. A belief the universe will always provide, whether a person takes action or not.
- Money is unimportant. This rationalization is used to excuse poor financial decisions.
- Money will give my life meaning. People with this script often immediately and strongly reject it. Their actions may tell a different story.
- It’s not nice (or necessary) to talk about money. This attitude may be formed by the idea it is not polite to talk about money, politics, or religion.
- If you are good, the universe will supply all your needs. This belief is prevalent among people in helping professions and those from strong religious backgrounds.
Sources: 1 https://newprairiepress.org/cgi/viewcontent.cgi?article=1009&context=jft 2 https://www.onefpa.org/journal/Pages/DEC14-The-Psychology-of-Wealth-Psychological-Factors-Associated-with-High-Income.aspx 3https://books.google.com/books?id=cF-hAgAAQBAJ&q=most+common#v=onepage&q=most%20common&f=false 4ttps://www.onefpa.org/journal/Pages/How%20Clients%E2%80%99%20Money%20Scripts%20Predict%20Their%20Financial%20Behaviors.aspx