Caught In The Middle: More Are Taking A Cautious Approach To Investing

MINNEAPOLIS – April 13, 2021 – Although the economy is showing signs of rebounding from challenges brought on by the pandemic, many Americans are still worried about market volatility and prefer to take a cautious approach to investing.

According to the 2021 Q1 Quarterly Market Perceptions Study from Allianz Life Insurance Company of North America, nearly three-quarters (74%) of Americans believe markets will continue to be very volatile in 2021, up slightly from 72% in Q4 2020. As a result, nearly half (48%) of respondents said they want to stay neutral and not take action in the market – compared to 43% in Q4 2020 and 46% in Q3 2020.

In addition, 40% of Americans said they are too nervous to invest in the markets right now (up from 34% in Q4 2020), with more than half (56%) believing a recession is right around the corner, and 52% feeling like there is another big market crash on the horizon.

Yet, despite this anxiety, a surprising number of Americans remain optimistic about their finances for the remainder of 2021. A full two-thirds of respondents said they believe the economy will improve this year and 68% feel their personal financial situation will improve – consistent with responses from Q4 of last year.

“Investors seem to be in limbo right now, wavering between nervousness about the potential for volatility and hope for a better year, resulting in a lot of inaction that can be costly in the future,” said Kelly LaVigne, vice president of Consumer Insights, Allianz Life. “It’s important that people understand there are ways to participate in the market while still having a level of protection, ensuring they’re not missing out on potential gains that may be important to the future health of their retirement accounts.”

Interest In Protection Products On The Rise

Nearly half (48%) of respondents said they are willing to give up some potential gains for a financial product that protects a portion of their retirement savings, up from 43% in Q4 2020. Furthermore, two-thirds said they believe it is important that they have some of their retirement savings in a financial product that provides protection from market loss, up from 61% in Q4 2020.

One lingering struggle for many is the financial difficulties caused by the ongoing pandemic. Over half (52%) of Americans say COVID-19 is having a negative effect on their retirement plans, and 37% say they do not feel financially prepared to ride out the economic impacts of COVID-19. More than one-third (34%) also say they have had to dip into their retirement savings because of the impact of COVID-19.

Millennials continue to be hit the hardest during the pandemic, with almost half (47%) saying they have had to spend some of their retirement savings (compared with 33% of Gen Xers and 22% of baby boomers). Further, more than half (59%) have also either stopped or reduced saving for retirement (compared with 41% of Gen Xers and 32% of baby boomers).

“Although millennials seem to be having the most difficulty managing the financial fallout of the pandemic, they also have the most time to make up any losses,” noted LaVigne. “It’s important that they take this opportunity to reset and determine ways they can better prepare for both the good and bad times in the future. A good first step can be connecting with a financial professional who can help them incorporate risk management measures into their long-term savings strategy.”

Allianz Life conducted an online survey, the 2021 Q1 Allianz Life Quarterly Market Perceptions Study, in February 2021 with a nationally representative sample of 1,005 respondents age 18+.

Allianz Life conducted an online survey, the 2020 Q4 Allianz Life Quarterly Market Perceptions Study, in December 2020 with a nationally representative sample of 1,003 respondents age 18+.

Allianz Life conducted an online survey, the 2020 Q3 Allianz Life Quarterly Market Perceptions Study, in August 2020 with a nationally representative sample of 1,004 respondents age 18+.