Americans’ financial stress levels edged slightly higher in June, amid growing concerns over ongoing global trade disputes after falling to an all-time low last month.
The IBD/TIPP Financial-Related Stress Index rose 1.2 points (2.4 percent) to a reading of 51.1, which is still near the record low of 49.9 set in May. Further, despite the slight uptick, the measure remains eight percent lower than last June’s Index score (55.6).
Although geopolitical tensions are creating some uncertainty regarding the outlook for the economy, consumers remain relatively confident in their financial circumstances, largely due to a strengthening labor market.
TechnoMetrica developed the monthly IBD/TIPP Financial-Related Stress Index in order to measure the levels of stress that Americans have displayed in regards to their personal finances. An Index reading above 50 indicates more stress, while an Index reading below 50 indicates less stress.
Based on recent trends in the measure’s moving averages, TechnoMetrica anticipates that stress over personal finances will likely ease again in the near future.
For instance, the six-month and 12-month averages both declined in June, with the shorter-term six-month average posting its eighth consecutive monthly drop. In addition, the Index remains below all three averages, indicating relatively healthy levels of money stress.
Meanwhile, investors have sharply increased their use of hedging strategies, signaling concerns that the intensifying trade battle between the United States and China might hit global economies from Germany to South Korea, Reuters reported.
Money managers say that mounting barriers to trade between the United States and trading partners — Washington’s latest proposal for tariffs on $675 billion of Chinese goods is expected to elicit a response from Beijing — is prompting them to look for ways to protect profits in the event equity markets take a dive after years of growth. That includes bets against declines in equity indexes and currencies as well as dividends and bonds.
“Only now have trade war concerns grabbed the spotlight for investors after bubbling away in the background for most of this year, prompting the rush for such hedging trades,” said Gerard Fitzpatrick, London-based chief investment officer for Europe Middle East and Africa at Russell Investments, which has nearly $300 billion of assets under management.
Trade isn’t the only issue weighing on investors’ minds. European growth has lost steam, oil prices are near $80 a barrel while the U.S., European and many emerging central banks are tightening monetary policy.
Hedging strategies also carry risk, however, namely that an anticipated market fall does not materialize.
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