This morning, Bloomberg reported a decline in the overall personal finance confidence among Canadians. “Asked about their personal finances, Canadians are twice as likely to say it is worse than better than a year ago,” Nanos Research Group Chairman Nik Nanos said in the summary of the report.
Is it any coincidence that consumer confidence in matters of personal financial health is at its lowest since June, at a time of year when we wake up in the dark, come home from work in the dark, experience falling temperatures, worsening weather, and the oncoming burdens of holiday-season-related expenses?
Seasonal Affective Disorder, or SAD, is a form of depression that comes and goes with the onset of the fall and winter months. The Canadian Mental Health Association has conducted research in Ontario suggesting that between 2% and 3% of the general population may have SAD. Another 15% have a less severe experience described as the “winter blues.”
Canadians’ optimism about their finances may wane in the winter, as well, for reasons that are as practical as they are emotional. In addition to the aforementioned holiday expenses, the amount most households spend on utilities will generally increase as temperatures drop and sunlight recedes. Winterization of vehicles, changing commute patterns, and many other seasonal factors contribute to declining optimism.
There is academic data to support the idea that “winter blues” reverberate in the financial world. Research from the University of British Columbia’s Sauder School of Business conducted by Kin Lo and Serena Wu has explored the hypothesis that financial analysts are more pessimistic in the fall season, as indicated by their earnings forecasts and forecast revisions. Lo’s and Wu’s research also investigates the possibility that equity returns fail to anticipate the downward impact of SAD on forecast revisions.