The Fed’s efforts to tame stubborn inflation have impacted most Americans in the pocket, with 61% reporting a financial hit in the past 12 months as a result of interest rate hikes.
And their caution about market volatility means they need their advisors to help them not lose money, which they are increasingly reluctant to invest, according to the 2023 Q2 Quarterly Market Perceptions Study from Allianz Life.
The research found that not all Americans have a bad view of interest rate increases, with almost 4 in 10 saying they've benefitted in the last 12 months.
“Rising interest rates can sometimes feel like a double-edged sword,” Kelly LaVigne, vice president of consumer insights at Allianz Life, said in a statement. “While savings accounts are earning more interest, it is also more expensive to borrow money for big purchases like a home and many Americans worry that rising interest rates are a harbinger of a recession.”
In fact, the poll found that almost two-thirds of respondents (64%) believe a major U.S. recession is on the way, up from 57% in the previous quarter, having declined over several previous quarters.
Boomers are most likely to be fearful of recession (67%) but Gen Xers (61%) and millennials (63%) are not far behind them.
The next generation of retirees is understandably showing greater concern about the future of Medicare and Social Security, with 80% of all poll participants citing this worry, including 79% of boomers and millennials, but 86% of Gen Xers.
Clients are watching the potential for greater market volatility unfold and are reluctant to convert their cash into other assets.
The survey of more than 1,000 investors discovered that 66% of respondents admitted to holding more cash than they should rather than investing because they are worried about losses, something that LaVigne says doesn’t make sense.
“You want to have an emergency fund, but you are likely losing purchasing power by not putting your savings to work for you,” he said. “For long-term goals like retirement, it is critical to take part in the market to try to alleviate the effects of inflation.”
Respondents want to see more financial products that can help them mitigate market risks, including 69% who believe it is important that some of their retirement savings are protected in this way.
More than 6 in 10 respondents would consider changing financial professional if they don't offer products that reduced their clients' exposure to market volatility.
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