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Financial Health
September 16, 2020

Investors express pessimism as election approaches and pandemic continues

Latest Wells Fargo/Gallup Investor and Retirement Optimism Index survey finds investors less optimistic about economic growth.

Economic concern leads the polls among issues that will potentially influence presidential voting decisions, according to the Wells Fargo/Gallup Investor and Retirement Optimism Index survey conducted in August.

Economy beats out pandemic in race for the White House

Ten human silhouettes are shown, with seven in purple and three in gray. The text '69% Economy' is over some of the silhouettes. Above the graphic: About seven in 10 investors rank the economy as top issue influencing their vote this November.
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.

About seven in 10 investors (69%) say the presidential candidates’ positions on the economy are very important in determining how they will vote.

“The economy is top of mind for most of the investors that we surveyed,” said Tracie McMillion, head of Global Asset Allocation Strategy for Wells Fargo Investment Institute.

And their interest will likely last well beyond the election. “Survey results also indicate that more than half of investors think that this year’s market downturn will impact their long-term financial security and retirement,” McMillion added. “Only 40% say that they’re relatively optimistic about economic growth over the next 12 months.”

The overall index, which looks at investor optimism about the stock market, is up only slightly from the second quarter. Optimism remains substantially lower than in the first quarter, when it was at a 20-year high.

The survey draws from a web study of investors, defined as adults in households with at least $10,000 in stocks, bonds, or mutual funds in investment accounts, self-directed IRAs, or 401(k) retirement accounts. Two in five U.S. households include a member who fits this definition.

Two-thirds of investors believe the road to economic recovery will be far from smooth

A circle graph with text that reads: 63% of investors believe the road to recovery will be rough; 40% expect multiple downturns; 37% expect continued improvement; 23% expect at least one more downturn.
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 markets versus the economy

Concern about the economy is likely linked to investors’ reported concerns about the ongoing pandemic.

Sameer Samana
Sameer Samana

According to Sameer Samana, senior global market strategist with Wells Fargo Investment Institute, investors typically assess the economy by looking at policy decisions, the labor market, and consumption patterns, factoring in consumer confidence and other information.

The continuing pandemic has impacted all these factors, and the coronavirus response has hit home for investors as well. About eight in 10 investors surveyed reported that their households received a check as part of the coronavirus relief payments. About half said they spent those relief payments on essentials, such as bill payments.

“Investors do their best to anticipate downturns in earnings and the economy,” Samana said, “which is why it’s often said that the markets lead the economy.”

Eight in 10 Americans with investment savings* report their household received stimulus relief

A circle graph with text that reads: 80% of investor households received a relief payment; 47% say they spent it on essential goods and services or bills; 31% say they saved or invested it.
*Investable assets of $10,000 or more, either in an investment account or in a self-directed IRA or 401(k) retirement account. 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.

Stock market worries

Of the various challenges that could affect the stock market this year, investors worry most about the coronavirus, with 40% reporting they are “very worried” about the pandemic. The November election ranks a close second at 36%, and the federal budget deficit third at 32%.

“The survey really does confirm that the impact of the virus pandemic is pretty widespread across the United States,” said Kim Ta, head of Client Service and Advice for Wells Fargo Advisors. “And this likely means that it is going to be a while longer before we see sentiment improve among investors. About two-thirds of investors responding to the survey also said they thought that the road to the U.S. economic recovery would be far from smooth.”

Investors are planning for the road ahead in greater numbers as a result. The survey indicated 60% are taking the time to budget and plan ahead — at least for the short term. About half (48%) will be taking the advice of investment professionals and doing more long-term financial planning.

“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.


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