With the stock market in bear market territory and inflation cutting into spending power, a new study finds that Americans are increasingly anxious about the possibility of a recession.
In fact, two-thirds of Americans (66%) say they are expecting a major recession right around the corner, according to the 2022 2Q Quarterly Market Perceptions Study from Allianz Life. Notably, this is up about 20% from the same time last year when 48% expressed concern and the highest level of worry since 2018.
Adding to the sense of dread is the continuing record inflation. More than 8 in 10 respondents (82%) say they worry about rising inflation continuing to have a negative impact on the purchasing power of their income in the next six months. At the same time, 71% say their income is not keeping up with rising expenses. This is the highest percentage of people who have expressed this concern in at least a year, the firm notes.
“Rising costs of necessities like food and gas are hitting Americans’ bank accounts,” notes Kelly LaVigne, Vice President of Consumer Insights at Allianz Life. “Some might have dipped into their savings to cover those initial increases in the short term. But, as this drags on, the worry about how increasing inflation will affect purchasing power and saving in the long term is increasing.”
Similarly, the same majority (82%) say they expect inflation to get worse over the next 12 months. According to the study, the reality of record inflation is challenging generations in different ways:
- Fewer Millennials say they have an effective financial plan in place to help address the rising cost of living. While 61% said they have a plan for inflation in the first quarter, 56% said the same in the second quarter.
- Generation X is concerned about their income keeping pace. Three-quarters (75%) of Gen X respondents said their income is not keeping up with rising expenses, up from 68% in the first quarter.
- Most Baby Boomers (73%) worry that they might not be able to afford the lifestyle they want in retirement because of the increased cost of living. In comparison, 66% said this was a concern in the first quarter.
Protecting Assets
With worries on the rise, Allianz Life observes that Americans are looking to hedge their bets and protect themselves from market risks. Most respondents (60%) say they think it is important to have some retirement savings protected from loss. What’s more, nearly 7 in 10 (69%) respondents say they wish they could have locked in gains when the market was high.
Meanwhile, more people say they are keeping cash on the sidelines, with 65% of respondents saying they are keeping more money than they should out of the market because of worries about loss. This is up from 57% in 2021 and 54% in 2020.
Regrettably, the number of Americans who think it is a good time to invest continues to decline. One in four (25%) respondents say it is a good time to invest in the market, down from the first quarter (28%) of 2022 and the fourth quarter of 2021 (37%).
What’s more, only 25% of respondents say they believe it’s worth the risk of potential losses to have unlimited potential gains. This is the first time the level has dipped below 30% since tracking started in 2018, the firm notes.
The Q2 Quarterly Market Perceptions Study was conducted in June 2022 among a nationally representative sample of 1,004 adult respondents.
