U.S. Investors Expect Market Correction, Take It in Stride
by Megan Brenan
- 61% of U.S. investors say it is a good time to invest in the stock market
- 54% say a stock market correction is on the horizon
- 15% say fear of a market correction is making their lives stressful
WASHINGTON, D.C. -- As stock prices continue to climb, 61% of U.S. investors
think it is a good time to invest in the stock market. While many financial
analysts warn of a possible market correction in the near future, few
investors report hearing "a lot" about it in the news. However,
54% of investors anticipate such a downturn will occur in the coming months.
These findings are from the third-quarter Wells Fargo/Gallup Investor and
Retirement Optimism Index survey, conducted July 28-Aug. 6. The survey
reflects the views of U.S. adults with $10,000 or more invested in stocks,
bonds or mutual funds. Polling was conducted as the Dow Jones industrial
average closed above 22,000 for the first time.
The Dow has roughly tripled since early 2009. The current bull market is
one of the longest in U.S. history, and investors are more sanguine than
they have been in years. The
Wells Fargo/Gallup Investor and Retirement Optimism Index, which gauges investors' attitudes based on three personal finance
measures and four economic measures, is at its highest point since 2000.
However, many financial analysts warn that the market is overinflated and
that a market correction -- a decline of at least 10% from its most recent
high point -- is inevitable before the end of the year.
Investors Unprepared and Vulnerable to Losses, but Not Stressed
A majority of U.S. investors say they would be hurt "a lot" (13%)
or "a moderate amount" (43%) by a major market correction, while
a sizable minority would be hurt "a little" (32%) or "not
at all" (11%). High-asset investors, those with at least $100,000
invested, are more likely than those with lower assets to say a correction
would hurt them.
While a majority anticipate a market correction, fewer investors (32%)
"strongly agree" that they are prepared for it. Forty-eight
percent "somewhat agree" that they are prepared for a correction,
while 13% "somewhat disagree" and 5% "strongly disagree."
High-asset investors are substantially more likely than those with lower
assets to consider themselves prepared. This may be related to the fact
that higher-asset investors are more likely than those with lower assets
to use a financial adviser to help them make investment decisions (65%
vs. 41%, respectively) and to have a written plan that governs their financial
decision-making (55% vs. 40%).
When asked about specific actions they are taking in anticipation of a
market correction, about half of all investors (48%) say they are consulting
with a financial adviser. Smaller percentages are engaging in each of
the other three actions tested:
- 40% are rebalancing their portfolios
- 20% are purchasing bonds to reduce exposure to market risks
- 18% are selling stocks to protect from future losses
Meanwhile, among those who think a correction is looming, 62% plan to ride
it out and maintain their current investment allocation. Fewer investors,
27%, will use it as a buying opportunity to invest more in the market,
and 9% will exit the market and move money into cash.
Retired investors are no different from all investors in expecting a correction
soon. However, these investors -- who typically favor stability and may
hold a more risk-averse portfolio -- are more likely than those who aren't
retired to ride out the market volatility. Those who aren't retired
are more likely than retired investors to use the opportunity to invest more.
Despite their vulnerability to loss and their lack of preparation for a
stock market correction, only 15% of investors say fear of a market correction
is making their lives stressful.
Historically, corrections of 10% or more tend to occur about once a year
and last for a few months. Since the economic downturn in 2008, there
have been six stock market corrections, the last of which was in late
2015 into early 2016 and was about a 13% loss. Given the frequency with
which corrections occur and the market's tendency to rebound, perhaps
it is not surprising that few investors are overly concerned about the
prospect of another one soon.
Results for the Wells Fargo/Gallup Investor and Retirement Optimism Index
survey are based on questions asked July 28-Aug. 6, 2017, on the Gallup
Daily tracking survey, of a random sample of 1,006 U.S. adults having
investable assets of $10,000 or more.
For results based on the total sample of investors, the margin of sampling
error is ±4 percentage points at the 95% confidence level. All
reported margins of sampling error include computed design effects for
Each sample of national adults includes a minimum quota of 70% cellphone
respondents and 30% landline respondents, with additional minimum quotas
by time zone within region. Landline and cellular telephone numbers are
selected using random-digit-dial methods.
Learn more about how the
Wells Fargo/Gallup Investor and Retirement Optimism Index works.