While recession fears are short, financial confidence is even lower, finds a new survey released today by the Nationwide Retirement Institute.
According to Nationwide’s Advisor Authority survey, even as four in 10 investors believe the U.S. is in a financial crisis and three in 10 believe the nation is approaching one, only 36% are confident they would survive a recession, despite already living through previous crises during the COVID-19 pandemic and the recession in 2008. Thirty-nine percent say they are even more nervous in protecting their finances after living through prior market downturns.
The results are surprising, as a chunk of investors already expect financial crises in their future. Twenty percent of investors surveyed anticipate experiencing two more financial crises in their lifetimes, and close to half (43%) believe they’ll see three or more.
“With the echoes of the COVID recession and 2008 still fresh in people’s minds, it’s not surprising investors are bracing for the worst considering some of the news making headlines this year,” said Mark Hackett, Nationwide’s chief of investment research, in a statement. “While it’s reasonable for investors to expect a recession in the year ahead, some of the pessimism we’re seeing among survey respondents may be overblown. Our economics team still predicts a moderate, shallow and short recession at this point, and I think it’s premature to label today’s environment a crisis. However, it is a good time to revisit your plan with an advisor or financial professional, and we’re seeing more confidence among investors who do so.”
Generations have distinct recession outlooks
Nationwide found investor responses were often bleaker for older generations, as 38% of Gen X and 29% of Baby Boomers say they expect a prolonged period of severe market downturn caused by stagflation and instability. Additionally, two-thirds (65%) of Gen X and almost half of Baby Boomers (48%) expect to live through at least two more financial crises in their lifetimes.
While worried, Millennials and Gen Z workers were likelier to have a positive outlook on the market. Over half (56%) of Gen Z and 50% of Millennials say they still expect to retire on time, and 58% of Millennials and 49% of Gen Z investors expect to live through at least three additional financial crises.
Despite their long-term optimism, younger generations’ expectations for a proximate recession are relatively in line with their older counterparts. A large share of Gen Z (43%) and Millennial (26%) investors expect a prolonged period of severe market downturn marked by stagflation and instability, said Nationwide.
Nearly half of advisors anticipate a short recession
While financial professionals expect economic turmoil to continue, close to half (42%) of all advisors expect the impending recession to be short and shallow that begins and eases gradually, and 23% expect a significant and prolonged market downturn marked by stagflation and instability.
According to Nationwide, nearly two-thirds (65%) of advisors think market volatility will increase over the next twelve months, with inflation (33%), interest rates (27%), and an economic recession (24%) being the most common causes.
As a result, advisors are preparing their clients by educating them on market cycles (43%), adopting strategies to protect their assets against market risk (43%) and listening to their needs and concerns (43%) to create a sense of control and security for clients during a market crisis.
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