Last year, the markets exhibited volatility that had many reeling. In the past few months, there have been numerous high-profile layoffs in the technology sector—something that previously seemed unfathomable in the rapidly growing industry. And just this month, markets and investors were rocked by both the emergence of a banking scare and the Fed announcing that it expected to raise interest rates higher and for longer than expected to get inflation in check.
Our survey results revealed that most investors expect a recession, are worried about its impact on their financial situation, and expect some financial pain associated with a recession.
Is a recession imminent? 68% of investors think a recession happening in 2023 is likely to nearly certain. In fact, less than 1% of respondents felt there was almost no chance that a recession would happen, compared with 11.9% who felt it is almost certain.
How worried are you? We asked several questions to gauge how worried they were regarding a recession’s impact on their financial situation. We found a near-even split between those who were worried (48.3%) and those who were not (43.4%), with a small number who could not be classified as either (8.3%).
What do you think will happen if a recession occurs? Investors most commonly expected to see news about it (91%), to lose value in their investment portfolios (74%), and to have to put off big-ticket purchases (62%). This suggests that most people expect a recession to affect their investments and household finances on some level.
How are you getting ready?
Our study showed most investors are not just sitting on their hands in the face of recession threat: 87% of investors took some action between June and December 2022 to prepare for a recession.
For example, about half of investors reported having reduced their monthly spending to prepare for a recession. Investors also reported seeking an additional income stream (40%), increasing their emergency savings (38%), and paying down debt (34%).
About half of them surveyed have taken some investment-related action to prepare for a recession such as updating their financial plan (22%), investing money in stocks (19%), and divesting in stocks (13%).
Overall, we see that most investors feel compelled to prepare for a recession, but the actions people are taking are varied, from building in wiggle room to adjusting their investments.
Individuals Surveyed:
- 949 pre-retirement investors
- Domiciled in the U.S.
- On average, investors were 39 years old
- On average, reported having $212,346 (median: $50,00) in assets and an annual salary of $112,402 (median: $90,000)
- Investors were defined as individuals who owned at least one of the following items: employee-provided retirement account, individual retirement account, mutual funds, stocks, exchange-traded funds, money market funds, brokerage account, HSA, annuities, or cryptocurrency.
- Survey was distributed in December 2022 using the Prolific online research platform
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