Continuing Market Volatility? Most Consumers Expect It for 2021

As I write this in the early part of January, 2021, there is certainly a more optimistic feeling among people I know, both in our business and among family and friends. Maybe it’s the COVID-19 vaccinations that are rolling out across the world, or maybe it’s just the simple fact that 2020 will soon be in the rear view mirror. But whatever the reasons, there’s a general feeling that things will in fact get better for all of us.

A new study from Allianz Life Insurance Company of America (Allianz Life) illustrates that, despite the optimism that we’re seeing right now, most people in the United States are concerned about continued market volatility in the year ahead. New findings from the company’s Q4 Quarterly Market Perceptions Study show that people in the United States are worried that markets will retreat from their recent highs, with 44% saying they believe that the market hasn’t bottomed out yet, and almost three-quarters (72%) believing the markets will continue to be very volatile in 2021.

As a result of those investor concerns, the study reports that fewer people say they are ready to invest now than in the previous quarter (25% now compared to 29% in the past quarter). Even more indicative of the current financial predicament many people face is that more than one-third of those surveyed (34%) say they have had to dip into their retirement savings because of COVID-19’s impact on the economy.

“We’ve watched as the pandemic continues to wreak havoc on peoples’ financial and retirement strategies whether that is from unexpected job loss or early withdrawal of retirement assets,” said Aimee Johnson, vice president of advanced markets and solutions, Allianz Life. “It’s clear that people remain nervous about market risks and how their finances will continue to be impacted not only in 2021, but for many years ahead.”

As the pandemic continues, more than one half (53%) of the survey respondents said that COVID-19 is having a negative effect on their retirement plans, and a full one-third (33%) say they don’t feel financially prepared to ride out the economic impact of this pandemic.

According to the Allianz Life survey, millennials appear to have been hit hardest during the pandemic, with almost one half (48%) saying they have had to dip into their retirement savings. In contrast, only 32% of Gen Xers and 22% of Baby Boomers have had to do so. Further, one half of millennials also either have stopped adding to or reduced retirement savings, while only 41% of Gen Xers and 36% of Baby Boomers report that.

There’s optimism in this study as well. Allianz Life reports that 66% of those surveyed say they believe the economy will improve in 2021, and another 67% say they think their personal financial situations will ultimately improve.
Many respondents reported that they have learned some lessons this year, with 67% saying the impacts of COVID-19 on the economy have made them rethink how to protect their retirement savings. And if market volatility persists in the coming year, more than one half (56%) believe they will have to adjust their retirement strategies.

“While many of us were ready to leave 2020 behind, we shouldn’t forget some of the things we can take away from this unprecedented year, including how to prepare for and manage risks within a retirement strategy,” Ms. Johnson conclude. “Taking steps to help mitigate these risks now can make a big difference in both the long- and short-term as we wait to see what 2021 has in store for us.”

Charles K. Hirsch, CLU, is the president of Hirsch Communications Consulting, LLC, a communications consulting operation in Florissant, MO. For many years, Chuck was the editor and publisher of Life Insurance Selling magazine, and has published several of the leading life insurance industry magazines. Chuck continues to contribute articles on a regular basis to industry publications, in addition to providing a wide range of writing, editing, content development, and marketing services through his firm. He is a regular contributor to NAILBA Now e-Newsletter as well as to Perspectives magazine.