Facts vs. Feelings

Hi Reader,

There's often a disconnect between what we think is happening in the economy and what is ACTUALLY happening.

I think of this as the difference between facts and feelings.

In today's email, I'm sharing:

  • How consumers currently feel about the economy
  • What the actual economic data says
  • Why the disconnect between facts and feelings exists

Before we dive in...did you catch this week's podcast episode?

Dividend Investing (Part 3)

​In this week's episode, I'm discussing Stock Buybacks (a.k.a. "flexible" dividends). What are they...how do they work...and why are they more tax-favorable than traditional dividends? Tune in to learn more 👇

Facts vs. Feelings

Below are the results from a recent consumer survey published by The Guardian:

  • 56% of Americans believe that the US is in an economic recession.
  • 72% think that inflation is increasing.
  • 49% believe that the S&P 500 index is negative for the year.
  • 49% believe that unemployment is at a 50-year high.

Whether you share these same beliefs or not, the data convincingly shows them to be incorrect.

Though, that doesn't mean it's unreasonable to think that they might be true as I'll get to in a moment.

Before we do, let's first address the data so that we can clear up any misconceptions:

  • The US is not in a recession. GDP has grown in both of the last two quarters and by about 5% over the last year.
  • Yes, prices are rising, but inflation is not increasing. Prices always go up over time. Inflation measures the rate at which prices go up. Since its peak in 2022, the inflation rate has consistently been declining. Prices are increasing, but at a slower pace than they once were.
  • The U.S. stock market is not down this year. The S&P 500 opened the year at 4,742 and today stands just over 5,300 (~12% increase).
  • Unemployment has been below 4% for 26 consecutive months. This is the longest such streak since the 1960s!

As disconnected as people's beliefs are from the facts, it's easy to be skeptical about the survey's findings.

You might ask:

"How could people be so unaware of how good things are?!"

Perhaps a better question is:

"If everything is so great, why don't more people realize it?"

I think there are a couple of reasons.

First, we tend to believe that the world is deteriorating around us because we’re constantly exposed to the struggles of people all over the world via social media and the negative nightly news.

So, it almost never feels like everything is great, even if the economic data says that it is.

And second, as I alluded to earlier, there’s a big difference between economic data and our lived experience.

Here are three examples of what I mean:

1.) Economists can say that recent inflation was only 3.4%. However, our experience is that prices have risen by almost 20% since the start of 2021. We don’t feel the slower rate of increase on a month-to-month basis; we feel the cumulative effect in our wallets.

2.) It’s the same story with wages. They are rising, but since the prices of everything we want to buy have risen so much, we don’t feel like we’re getting ahead.

3.) Then, there’s real estate. Homes are often the largest asset on consumer balance sheets, so rising home values are typically a good thing. However, due to the combination of higher prices and higher interest rates, new mortgage payments have nearly doubled over the last three years. The result is frustration with new homebuyers being priced out of the market and current homeowners feeling trapped in their homes.

Bottom Line

I could go on here with many more examples, but my point is simply that our personal experiences (and feelings) don’t always match up with the data (facts), which might explain the negative survey results.

I wanted to bring this disconnect between facts and feelings to your attention because it’s easy to become frustrated with the current state of affairs even if your financial position is better than ever.

My hope is that this note helps you understand why you might feel the way you do and that you’re not alone in that feeling.

This, too, shall pass.

Stay wealthy,

Taylor Schulte, CFP®

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Taylor Schulte

I'm the host of the Stay Wealthy Retirement Show and founder of Define Financial, an award-winning retirement and tax planning firm. When I’m not helping people lower their tax bill, you can find me traveling with my wife and kids, searching for the next best carne asada burrito, or trying to master Adam Scott’s golf swing.

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