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Americans Getting Accustomed to Market Volatility

Industry Trends and Research

After enduring persistent stock market volatility throughout 2018 and the beginning of 2019, Americans seem to have adapted to this "new normal," a new study reveals. 

Given the ongoing volatility, Americans remain cautiously optimistic, with one-third of respondents saying they are comfortable with current market conditions and are ready to invest. In addition, 52% reported feeling confident the stock market will grow 5% or more in 2019, consistent with 2018. 

These findings were revealed in the Allianz Life Quarterly Market Perceptions Study, the first in an ongoing quarterly survey that will examine Americans’ perceptions of market activity and their feelings toward investing while simultaneously saving for retirement. 

“Last year was one of the most volatile years on record and after the major stock declines at the end of 2018, Americans are apparently becoming accustomed to volatility,” notes Kelly LaVigne, Vice President of Advanced Markets for Allianz Life. “This might be setting a dangerous precedent as they could become desensitized to potential major market swings in the months ahead.” 

And while more than half of respondents are optimistic about the stock market, they reportedly are also fearing what’s next. More than 4 in 10 say they worry that a major recession or big market crash is on the horizon. 

“This juxtaposition in attitudes may be attributed to the fact that, despite ongoing volatility in the short term, the market is still in the longest bull market run ever. But people are wondering how long the good times will last,” LaVigne adds. “They need to keep focus on the long term, and prepare and protect their retirement when this bull run inevitably ends.” 

Consequently, consumers still want growth potential but are looking for protection. The ongoing exposure to volatility has changed what sort of financial solutions consumers may seek, with fewer saying they are willing to give up some potential gains for a product that protects from market losses – 49% in the first quarter of 2019 versus 57% in 2018. 

And this comes as an increasing number of respondents – 41% in the first quarter of 2019 versus 38% in 2018 – say that if the market dropped, causing them significant losses, there is no way they could rebuild their savings in time for retirement. 

Millennial Caution

Somewhat surprisingly, Millennials, who tend to be more optimistic, are proving to be the most cautious about what the future may bring, the study notes. They apparently are more worried about an impending recession (52% compared with 46% of Gen Xers and 44% of Baby Boomers), and also feel more nervous about investing in the market right now – registering at 43% compared with 35% of Gen Xers and 29% of Baby Boomers. 

In addition, while Millennials express interest in a variety of products, they have a higher interest in products with modest growth and no potential loss, compared to older generations – 24% versus 16% of Gen Xers and 11% of Baby Boomers.

“If market volatility really is the new normal, then it’s important that people of all ages take the right steps to protect themselves in the short term, approaching, and all through retirement,” LaVigne further emphasizes. 

Findings in the 2019 first quarter study are based on an online survey conducted in March 2019 with a nationally representative sample of 1,005 respondents age 18 or older.