The Most Worry in Years: Americans Are Increasingly Anxious About a Recession As Inflation Cuts into Spending Power

MINNEAPOLIS — With the stock market in bear market territory and inflation at historic levels, Americans are increasingly anxious about the possibility of a recession. Two-thirds of Americans (66%) say they are expecting a major recession right around the corner, according to the 2022 2Q Quarterly Market Perceptions Study* from Allianz Life Insurance Company of North America ( Allianz Life ). This is up about 20% from the same time last year when 48% expressed concern and the highest level of worry since 2018.

Continuing record inflation is adding to the collective sense of dread. The vast majority (82%) of respondents say they worry about rising inflation continuing to have a negative impact on the purchasing power of their income in the next six months. At the same time, 71% say their income is not keeping up with rising expenses. This is the highest percentage of people who have expressed this concern in at least a year.

“Rising costs on necessities like food and gas are hitting Americans’ bank accounts,” said Kelly LaVigne, VP of Consumer Insights, Allianz Life. “Some might have dipped into their savings to cover those initial increases in the short term. But, as this drags on, the worry about how increasing inflation will affect purchasing power and saving in the long term is increasing.”

The majority (82%) say they expect inflation to get worse over the next 12 months.

The reality of record inflation is challenging generations in different ways:

– Fewer Millennials say they have an effective financial plan in place to help address the rising cost of living. While 61% said they have a plan for inflation in 1Q, 56% said the same in 2Q.

– Generation X is concerned about their income keeping pace. Three in four (75%) of Gen X respondents said their income is not keeping up with rising expenses. This is up from 68% in 1Q.

– The majority of Baby Boomers (73%) worry that they might not be able to afford the lifestyle they want in retirement because of the increased cost of living. In 1Q, 66% said this was a concern.

Protecting assets from market risks

With worries on the rise, Americans are looking to hedge their bets and protect themselves from market risks. Most respondents (60%) say they think it is important to have some retirement savings protected from loss. Nearly seven in 10 (69%) respondents say they wish they could have locked in gains when the market was high.

More people say they are keeping cash on the sidelines, with 65% of respondents saying they are keeping more money than they should out of the market because of worries about loss, up from 57% in 2021 and 54% in 2020.

The number of Americans who think it is a good time to invest continues to decline. One in four (25%) respondents say it is a good time to invest in the market, down from 1Q (28%) and 2021 4Q (37%). What’s more – just 25% of respondents say they believe it’s worth the risk of potential losses to have unlimited potential gains. This is the first time first time this has dipped below 30% since tracking started in 2018.

*Allianz Life conducted an online survey, the 2022 Q2 Quarterly Market Perceptions Study in June 2022 with a nationally representative sample of 1,004 Respondents age 18+.

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