- An Allianz survey found that 48% of Americans do not want to take action in the equity market right now.
- The survey showed nearly 75% of Americans foresee stock-market volatility picking up again in 2021.
- Analysts say more volatility is likely in store as more strong economic data challenges the Fed’s signaling on interest rates.
- See more stories on Insider’s business page.
Many Americans want to stay on the sidelines of the stock market this year as worries mount that volatility will accelerate and hurt their investments, according to a new survey from Allianz.
48% of the 1,005 respondents told the firm they want to stay neutral and not invest in the market right now, a rise from 43% over the final quarter of last year. That statistic runs parallel with findings that 74% of the group believes equity markets will continue to be very volatile this year.
The cautious tone comes as the US economy shows further signs of recovery from the coronavirus pandemic, with data this week showing a nearly 10% jump in March retail sales and new unemployment filings at a pandemic-era low.
“Investors seem to be in limbo right now, wavering between nervousness about the potential for volatility and hope for a better year, resulting in a lot of inaction that can be costly in the future,” said Kelly LaVigne, vice president of consumer insights at Allianz Life.
As the S&P 500 recently has climbed to all-time highs, Wall Street’s so-called fear gauge – the Cboe Volatility Index (VIX) – has slid back to its lowest level since before the start of the COVID-19 crisis. But volatility accelerated in the tech sector earlier this year as rising interest rates spurred concerns about the effect of higher borrowing costs on businesses. That prompted a sharp pullback in numerous high-flying tech stocks and knocked more speculative areas of the market like SPACs and green energy.
Another possible source of volatility involves the Federal Reserve, which has historically moved markets with rate-hike guidance. Inflation – which the central bank monitors closely when making decisions – is rising as the economy recovers, and although the Fed has said it will keep rates near zero until at least 2024, any deviation from that could jolt markets.
Talks over tax policy and infrastructure spending in Washington may also be a source of volatility for stocks moving forward this year.