Three Cheers for New Jersey

Give yourself a pat on the back: According to a survey from the Financial Industry Regulatory Authority, New Jersey is one of the top three most knowledgeable states for handling money, alongside California and and Massachusetts. The study participants were asked five basic financial literacy questions, and residents of the Garden State came out near the top.

It also looked at smart financial behaviors, and New Jersey did well on many of those measures as well. Some 45 percent of Garden Staters report having a rainy day fund, compared to 40 percent of all Americans. Only 30 percent of us reported that they pay just the minimum on their credit cards, as opposed to 34 percent of all people nationwide.

Here's another one in which we're gaining ground: 59 percent of people in New Jersey say they don't comparison-shop for rates before they choose a credit card, which seems like a lot but is actually below that national average of 61 percent. Back in 2009, we were worse than the national average.

Troubles for Small Business

We had good news this week about consumer confidence increasing, but a new study from Gallup throws a little cold water on those results. Over the course of the past 12 months, more small business owners report having to let workers go than have hired new ones. Only 11 percent of small business owners said their hiring increased over that time, while 23 percent said it declined.

The self-reported hiring levels for small business owners haven't moved much since January 2011. The index is at -11 now, but at least that's up significantly from the all-time low of -27 in January 2010.

The good news is that the number of business owners who expect to hire has been on the rise. That figure was just 17 percent back in January but is up to 20 percent now. The problem is that the number who expect to let workers go has also risen, from 9 percent in April 2012 to 14 percent now.

Americans Love This Economy

Americans just keep feeling better and better about this economy. According to the quasi-official numbers compiled by the Conference Board, the U.S. consumer-confidence index reached a five-year high of 76.2 in May, up from 69.0 in April. The related consumer sentiment survey hit a six-year high in May.

The biggest reason for the jump was increased optimism about the health of the economy over the next six months. The expectations index jumped to 82.4, more than 10 percent above the April level and the highest that figure has been in seven months. The percentage of respondents expecting more jobs to be available six months from now rose to 16.8 percent, the highest that number has been in 2013.

Oddly enough, the improvement in consumers’ outlook is coming when wages have been fairly stagnant. Median annual household income in April was $51,456, up marginally from March’s $51,190. Since the end of the recession, household income has remained in a narrow band between $51,000 and $52,000.

The Power of Balanced Funds

We’ve talked quite a bit about how equity mutual funds, which had seen outflows ever since the market crashed in 2008, have rebounded strongly this year. But another type of fund has also shown remarkable strength: Balanced funds, which have seen a record amount of money pumped into them.

Balanced funds invest in both stocks and bonds, which makes them a nice halfway point for investors still somewhat spooked by the stock market. According to a Bloomberg study, they’ve taken in more money from January through April of this year than in any previous four months on record. Assets in the balanced funds Bloomberg studied took increased 3.6 percent, or three times the rate of equity funds, which increased 1.2 percent.

The surprising thing about all this success is that the performance for balanced funds hasn’t been great.  Such funds have returned 8.8 percent this year, as opposed to 16 percent for the S&P 500. That’s to be expected, though; the bond part of the portfolio is intended to be protection against the riskier equity side of the portfolio.

Thoughts for Memorial Day

"A hero is someone who has given his or her life to something bigger than oneself." ~ Joseph Campbell

"Ceremonies are important. But our gratitude has to be more than visits to our troops and once-a-year Memorial Day ceremonies. We honor the dead best by treating the living well." ~ Jennifer Granholm

"Courage is contagious. When a brave man take a stand, the spines of others are often stiffened." ~ Billy Graham

The Incredible Performance of 401(k)s

A new study out from Fidelity Investments shows just how important staying invested in stocks has been to Americans' retirement savings. Since the stock market bottomed out in the first quarter of 2009, the average balance in a Fidelity 401(k) has nearly doubled, from $130,700 to $255,000, for people who aren't retired yet but are 55 and older and have been with their current employer for at lest ten years.

Although the study focused just on Fidelity customers, there's no reason to believe the results have been much different for all 401(k) holders. We're now at a record high for the average 401(k) balance, driven by a stock market in which the S&P 500 has risen by 145 percent since March 9, 2009.

And the increases have continued. The average balance in a Fidelity 401(k) - for investors of all ages - rose from $77,300 at the beginning of the year to $80,900 at the end of the first quarter.

Housing Recovery in Full Swing

The housing recovery looks like it’s finally in full stride, the final piece that should fuel the overall recovery of the economy. Sales of existing homes rose by 0.6 percent in April to an annual rate of nearly 5 million. That’s the highest that figure has been since November of 2009.

Prices are rising too, with April marking the fifth straight month in which property values didn’t just increase – it was the fifth straight month in which they increased by more than 10 percent. Median home prices were up 11 percent in April compared with the year earlier.

Home builders are growing more confident as well. A recent survey from the National Association of Home Builders shows expectations for future sales rose to 53 in May. That’s the most optimistic that group has been since February 2007, well before the recession began.