A new Allianz Life study has found even though Americans seem more comfortable with market volatility, over half surveyed are concerned about the effects the constant swings can have on their retirement security.
“As market volatility becomes a more constant part of our financial landscape, Americans are recognizing the value of options that provide both opportunity and a level of protection,” says Paul Kelash, vice president of Consumer Insights for Allianz Life Insurance Company of North America. “Because we can’t be certain when the next major downturn will occur, it’s important that people have the ability to grow their retirement savings while still safeguarding their financial future.”
Kelash discussed with Fox Business what the current mindset is about market performance and the concern about retirement savings should the market experience a significant drop.
Boomer: Why do you think people are reacting to market volatility the way they are?
Kelash: Although market volatility – as measured by the Cboe Volatility Index or VIX – has been much more dynamic this year than the low levels seen throughout 2017, many Americans seem to have psychologically come to terms with it. According to Allianz Life’s 2018 Market Perceptions Study (https://www.allianzlife.com/about/news-and-events/news-releases/Though-More-Comfortable-with-Volatility-Americans-Still-Lean-Toward-Protecting-Retirement-Savings) , more than a third (35%) of Americans said they are comfortable with current market conditions, up from 26% in 2015.
We think this is due in large part to the volatile political and economic news cycle this year. People seem to be numb to recent news events that likely would have caused significant anxiety only a few years ago. As a result, they are not making any emotional, news-driven decisions with their portfolios, which is generally a positive development.
In fact, we found that 65% of people surveyed are not considering taking any action with their portfolios due to short term volatility, including moving money from stocks to cash or pulling back on their investments.
Boomer: Does this comfort with short-term market volatility extend to Americans’ feelings about their financial future?
Kelash: Despite their feelings in the short-term, volatility still matters. While we see some increasing comfort with volatility, it is driving a simmering anxiety in many Americans – especially as it concerns their retirement savings. More than one third of respondents admit recent volatility is making them anxious about their nest egg and a similar number (38%) said that if the market experienced a significant drop causing them to lose a lot of money, there is no way they could rebuild their savings in time for retirement.