This is part three of a four-part blog about the, sometimes devastating, consequences of overnight wealth.
According to the National Endowment for Financial Education, 70% of people who come into sudden money are broke within a few years.
In this, the third of my blogs about The impact of sudden wealth, I want to focus on the consequences your new financial status can have on those nearest and dearest to you (family and friends) and how you can manage their expectations without giving offence.
First, the negative news
Let’s get the negative news out of the way first. The effect of sudden wealth on most relationships is, almost always, bad.
Eileen Gallo, a psychotherapist in Los Angeles and a columnist for the Journal of Financial Planning, spent two years studying people who had hit the jackpot through initial public offerings of stock, lotteries or unexpected inheritances.
Economic data globally remains supportive for markets helping factory orders, investment spending and earnings recover to multi- year highs. As economic data has remained firm, the IMF has upgraded its 2017 global economic growth forecast to 3.5%, a significant improvement from the 3.1% estimated for 2016. The improving economic backdrop is translating into rapidly improving corporate fundamentals as reflected in double-digit earnings growth across major markets (S&P500 EPS: +12.8%y/y). With global equities having registered six consecutive months of positive returns, the widely- followed VIX volatility index fell to a 10-year low on May 1st reflecting the broad improvement in market fundamentals over the past year. To be sure, there are a variety of issues that could cause bouts of market consternation in coming weeks including economic surprises moderating as forecasts catch up to stronger data flow, China tapping down on pockets of speculation (housing, commodities, FX outflows) and disappointment over the slow pace of progress on Trump’s tax cut legislation.