Inflation causing stress and anxiety: survey

BOSTON, Aug 9, (AP): State Street Global Advisors, the asset management business of State Street Corporation (NYSE: STT), has announced the findings of its survey, which reveals how inflation is influencing Americans’ spending, saving, and investing behavior. The survey found that with inflation on the rise, over two-thirds of investors (67%) are concerned about our country’s economic outlook over the next 12 months, with over half also expressing concern over market volatility (57%) and the value of their current investments eroding (59%). Notably, Generation X is significantly more concerned than Millennials or Boomers about the effects that inflation, the stock market and economy could have on their personal financial situation.

In the past 12 months, rising inflation has caused the greatest proportion of investors (51%), to curtail discretionary spending such as dining out and entertainment. Just over a third spent less on vacations or delayed a major purchase (35%), and 29% have cut back on essential expenses like groceries and gasoline.

“As Americans work to defend themselves against the corrosive effect of inflation on their finances, we’re encouraged to see the majority are making tradeoffs in discretionary spending, rather than sacrificing contributions to their longterm savings goals,” said Brie Williams, head of Practice Management at State Street Global Advisors. “Notably, less than one-quarter of Americans were willing to curtail contributions to their retirement savings or their child’s education savings, which demonstrates a firm commitment to their long-term financial goals.”

Tightening

With so many already tightening their belts, it is no surprise that 58% of investors agree that the US economy is headed for a recession in the next six to 12 months, with 47% agreeing with the statement:

Furthermore, they don’t believe the worst is over. Less than two-in-ten investors (17%) believe inflation has already seen its peak. That’s in sharp contrast to the 49% who do not think inflation has peaked.

Millennials are significantly more optimistic that inflation has already topped out than Gen X and Boomers; 43% of Millennials believe inflation has peaked, compared to just 5% of Gen X-ers and Boomers.

Record high inflation isn’t dampening Millennials’ optimism that they’ll reach their financial goals, either; 63% of Millennials are confident they can reach their financial goals, while overall, the majority of investors believe inflation is an obstacle. Less than half of Gen X-ers (32%) and Boomers (40%) are confident they’ll reach their financial goals due to rising inflation.

In June 2021, concern about rising inflation was similar across generations, however, in June 2022, significantly more Gen X-ers (88%) indicated concern compared to Millennials (72%) and Boomers (70%).

When it comes to the overall economic outlook for our country in the next 12 months, 76% of Gen X-ers are concerned, compared to 60% of Millennials and 65% of Boomers. The outlook for their personal financial situation wasn’t much better: 56% of Gen X-ers are worried about maintaining their current standard of living, compared to 46% of Millennials and 43% of Boomers.

Being able to afford to retire when planned is another worry with 59% of Gen X expressing concern over this, compared to 41% of Millennials and 31% of Boomers. Being able to afford expenses in retirement was also a bigger worry for Gen X, with 56% expressing concern, versus 41% of Millennials and 44% of Boomers.

Examination of the money moves each generation has made in the last 12 months reveals significantly more members of Generation X have cut back on spending compared to Millennials and Boomers.

A greater percentage of Gen X-ers than Millennials and Boomers have seen their finances derailed by inflation and have had to cut back on discretionary spending like dining out or entertainment (61%) and essential purchases like groceries or gasoline (41%), or delayed a major purchase like a vehicle or home appliance (39%).

Also:

OMAHA, Neb: The Investor Movement Index® (IMX SM ) decreased to 4.68 in July, down from 5.10 in June. The IMX is TD Ameritrade’s proprietary, behavior-based index, aggregating Main Street investor positions and activity to measure what investors actually were doing and how they were positioned in the markets.

The reading for the four-week period ending July 29, 2022 ranks “Moderate Low” compared to historic averages.

“Despite a strong finish at the end of the month, the markets were volatile in the face of macroeconomic concerns in July and TD Ameritrade clients continued reducing exposure as a result,” said Shawn Cruz, head trading strategist, TD Ameritrade. “While there’s a good case for optimism - in particular, we saw corporate earnings by and large avoid any anticipated ‘worst case’ scenarios - the looming threat of inflation and a possible recession has retail investors taking a serious look at their tolerance for risk and in many cases, demonstrating a preference for established names with strong underlying fundamentals.”

The July IMX period was once again characterized by elevated volatility. Building on its strong finish in June, the S&P 500 closed out July up 218.55 points, or +5.59%.