Ongoing concerns of COVID-19 and presidential election loom
After falling sharply between February and May with the rapid
onset of the coronavirus pandemic, investor optimism showed little
improvement in August despite the market rally.
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The Wells Fargo/Gallup Investor and Retirement Optimism Index
registered 18 in the third quarter survey, conducted Aug. 10 – 16
among U.S. adults with $10,000 or more invested in stocks, bonds or
mutual funds. This is up from an index score of 4 in the second
quarter, following a sharp drop from the 20-year high of 138 in the
first quarter.
The economy continues to weigh on investors’ outlook, with more
saying they are pessimistic (47%) about economic growth over the
next 12 months than optimistic (40%). Investors’ evaluation of
current economic conditions is also grim. About three-quarters
describe current conditions as “shaky” (49%) or “weak” (25%). Just
27% describe them as “solid” (24%) or “booming” (3%).
“Despite the gains in the markets, investor optimism remains
fragile as unemployment remains high and further stimulus is in
question,” said Tracie McMillion, head of asset allocation strategy
for Wells Fargo Investment Institute (WFII). “While we expect
economic growth to resume this year, consumers continue to exercise
caution on spending.”
Most investors believe economic downturn is ahead, dismissing
talks of V-shaped recovery
In terms of an economic recovery, two-thirds of investors
believe the road to recovery will be far from smooth. Forty percent
of investors believe the economy will have multiple downturns
before a recovery will take place, while another 23% believe the
economy will have at least one other significant downturn before
recovering — a so-called W-shaped recovery.
Only 37% of investors expect the economy to steadily improve
from the low point experienced in April — essentially a V-shaped
recovery that economists consider to be a best-case scenario.
Investors fear COVID-19 and the presidential election
Of the various challenges that could affect the stock market
this year, investors worry most about the coronavirus (40% are very
worried). The November election ranks a close second, at 36%, and
the federal budget deficit third, at 32%.
Two-thirds of investors (66%) believe “the stock market is
overheated relative to the economy.” Even so, the poll finds a
majority of investors are significantly more concerned about
economic growth (71%) than the stock market’s performance (6%) as
2020 continues to unfold.
“While there is uncertainty around the election, COVID-19, and
the economic environment, investors should stay focused on planning
for their long-term financial goals,” said Kim Ta, head of client
service and advice at Wells Fargo Advisors. “After all, elections
are the beginning, not the end, of any policy changes.”
Read the WFII Guide to the 2020 Elections.
Economy is leading factor for investors this election
Looking ahead to the presidential election, the economy is top
of mind for investors among 10 issues the poll tested as
potentially influencing their votes. About seven in 10 say the
candidates’ positions on the economy (69%) are very important in
deciding how they will vote. Healthcare (59%), education (58%), and
the coronavirus (57%) vie for second.
About half of investors rate taxes (51%), racial justice (51%),
and immigration (50%) as very important, but far fewer assign the
same level of importance to U.S. policy toward China (39%), climate
change (37%), or the federal budget deficit (36%). However, despite
the importance of the economy to investors’ votes this November,
most continue to believe the nation should prioritize reducing the
number of COVID-19 deaths (60%) over opening the economy and
getting people back to work as soon as possible (40%).
Investors feeling the financial pinch; stimulus checks bring
needed relief
As the coronavirus pandemic wears on, investors are more likely
now than they were in May to report that the economic disruption
caused by it is financially harmful to them. Forty percent, up from
32% in May, say the pandemic is having a negative effect on their
day-to-day finances.
Likewise, more investors than in May foresee this year’s stock
market downturn harming their long-term financial security and
retirement: 54% expect it to have a negative effect, up from 41% in
May.
Eight in 10 investors report that their household received a
check from the federal government as part of the coronavirus relief
payments sent out this spring. Of this group, 47% say they spent it
on essential goods and services or bills. Meanwhile, 31% of
investor recipients say they saved or invested it.
It’s not a total bust; boom in financial planning
emerges
While many nonretired investors’ day-to-day finances are being
affected by the coronavirus pandemic, that does not seem to be
affecting their investment decisions. Four in five nonretired
investors who have a retirement account say they have not made any
changes to those investments since the onset of the coronavirus
pandemic in March. Those who have made changes are more likely to
say they have decreased their contribution (13%) rather than
increased it (7%).
Bigger changes are seen with emergency funds, as 29% of
investors say they increased their contribution to such a fund
while 16% decreased their contribution.
At the same time, the pandemic may be spurring some behavioral
changes among investors. Nearly three-quarters of investors with a
spouse or partner (73%) say they have taken time to talk more with
that person about their finances, and 60% of investors say they are
doing more budgeting and short-term financial planning. Just under
half have done more long-term financial planning (48%) or estate
preparation (44%).
“The uptick in financial planning is a silver lining to the
pandemic and suggests that investors recognize that a
well-thought-out plan helps to create financial resiliency,” Ta
said.
COVID-19 impacts worth watching
- The upheaval caused by the coronavirus has only reinforced
investors' convictions that saving for retirement and owning your
own home are important, with more than nine in 10 saying their
belief these are important has either increased or stayed the
same.
- A quarter of investors (24%) say the pandemic — which has
forced colleges to move much of their teaching online — has
weakened their belief that attending a four-year college in person
is important.
- The largest segment of investors (43%) continues to identify
mutual or stock index funds as what they think is the best
long-term investment considering a time horizon of 10 years or
more, but the proportion has slipped from 54% choosing them in
2018; the change is offset by more investors citing a belief in
gold (11%) and real estate (23%) as the best long-term
choices.
Visit Wells Fargo Stories to read Investors express pessimism as
election approaches and pandemic continues and watch a video with
Ta and McMillion about the survey findings.
About the Wells Fargo/Gallup Investor and Retirement Optimism
Index
Results for this Wells Fargo/Gallup Investor and Retirement
Optimism Index are based on a Gallup Panel™ web study completed by
1,094 U.S. investors, aged 18 and older, from Aug. 10-16, 2020. The
Gallup Panel is a probability-based, longitudinal panel of U.S.
adults who Gallup selects using random-digit-dial phone interviews
that cover landline and cellphones. Gallup also uses address-based
sampling methods to recruit Panel members. The Gallup Panel is not
an opt-in panel. The sample for this study was weighted to be
demographically representative of the U.S. investor population,
using demographic targets determined from investor samples within
prior Gallup national adult surveys. For results based on this
sample, one can say that the maximum margin of sampling error is ±6
percentage points at the 95% confidence level. Margins of error are
higher for subsamples.
In addition to sampling error, question wording and practical
difficulties in conducting surveys can introduce error and bias
into the findings of public opinion polls.
For this study, the American investor is defined as an adult in
a household with stocks, bonds, or mutual funds of $10,000 or more,
either in an investment account or in a self-directed IRA or 401(k)
retirement account. About two in five U.S. households have at least
$10,000 in such investments. The sample consists of 69% nonretirees
and 31% retirees. Of total respondents, 42% reported annual incomes
of less than $90,000; 58% reported $90,000 or more. The median age
of the nonretired investor is 48 and the retiree is 69. The Wells
Fargo/Gallup Investor and Retirement Index is an enhanced version
of Gallup’s Index of Investor Optimism, which provides the
historical trend data.
The Investor and Retirement Optimism Index has an adjusted
baseline score of 100 from when it was established in October 1996.
It peaked at +152 in January 2000, at the height of the dot-com
boom, and hit a low of -81 in February 2009.
About Wells Fargo
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needs and help them succeed financially. Founded in 1852 and
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and commercial finance, through 7,400 locations, more than 13,000
ATMs, the internet (wellsfargo.com) and mobile banking, and has
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conduct business in the global economy. With approximately 260,000
team members, Wells Fargo serves one in three households in the
United States. Wells Fargo & Company was ranked No. 30 on
Fortune’s 2020 rankings of America’s largest corporations. News,
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Allison Chin-Leong, 212-214-6674
allison.chin-leong@wellsfargo.com Desari Mueller, 314-327-9615
desari.mueller@wellsfargoadvisors.com
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