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Most Americans Pessimistic About Economy: Survey

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A majority of Americans ushered out 2023 worried about the economy in the coming year, Allianz Life Insurance Co. of North America reported this week.

Only 47% of participants in a fourth-quarter survey expected the economy to improve in 2024. Optimism has trended downward in recent years, according to Allianz Life: from 66% in the fourth quarter of 2020, to 54% the following year, to 48% in 2022.

Allianz Life conducted an online survey in November among a nationally representative sample of 1,005 adults.

It noted that market uncertainty and interest rates could be driving Americans’ waning optimism. Seventy-four percent of respondents said the market will be very volatile in 2024, and 77% think interest rates will continue to rise in the coming year.

The survey found that Americans feel better about their personal finances, with 60% of respondents expecting their financial situation to improve in 2024. But even here their optimism has gone downhill, from 67% in 2020 to 65% in 2021 and 61% in 2022.

Millennials are more optimistic than older respondents about their own economic potential in 2024, according to the survey. Two-thirds of millennials think their financial situation will improve in the coming year, compared with 59% of Gen Xers and 51% of baby boomers. 

At the same time, 51% of millennials said they are too nervous to invest in the market right now, while just 40% of Gen Xers and 37% of boomers said they feel that way.

Inflation Hangover

The recent bout of inflation continues to haunt many Americans, the survey found. Sixty-seven percent of participants said that prices are still too high and that they had struggled to stay afloat in the past three months, while 28% said that inflation is not affecting them personally. 

The survey results showed that Americans want professional advice to mitigate the risk — and gave a heads-up to financial professionals. Three-quarters of respondents said they would stop using their current advisor if that person did not help them effectively manage their inflation concerns.

The results also showed that the effect of inflation on interest rates is causing many Americans to keep money out of the market. Fifty-five percent of respondents said they are holding more money in high-yield savings accounts or money market funds because of interest rates. 

Sixty-five percent of millennials said they are doing this, compared with 48% of boomers and 46% of Gen Xers. Sixty-one percent of survey participants overall said they would rather let their money sit in cash than endure market swings.

High-yield savings accounts or money market accounts are fine as far as they go, according to Kelly LaVigne, vice president of consumer insights at Allianz Life. They are a good place to build an emergency fund or save for a near-future expense. 

“But, those accounts aren’t likely to provide the greatest return on money over the long term,” LaVigne said. “For long-term goals like retirement, you’ll want to take part in the market and invest in ways that still mitigate potential risks like longevity and inflation.”

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