Two Recoveries Take Shape, As Investors’ Safety Net Improves
What a difference a few months make.
The robo-advisor, Betterment, released a new report today, analyzing how American investors have fared through the COVID-19 economy. By and large, looking at the numbers, and you might think the economy’s recovery is well on its way. People are feeling more confident, they’re less willing to pull funds out of investment accounts and are saving more.
In many ways, the results mirror the stock market. But while investors may feel strong, there are plenty parts of the picture that go unseen.
What has been pronounced in the US recovery from the COVID lockdowns has been the two, very different experiences of those whose industries and companies continued to hum against many others that saw their livelihood disappear. While those able to invest have done well – partly because the market has returned faster than the overall economy – there’s counter evidence that finds the exact opposite experience among the millions without work and few job prospects. It’s a representation of US’s split recovery.
The One Side Of The Recovery
Among those able to save, the worst seems to have passed.
According to the Betterment survey of 1000 investors, the rate of those saying they have no plans to tap their investments for funds has risen from 37% in March to 60% in September. The survey has tracked the same 1000 investors from March to now, gauging their experience during the downturn.
Meanwhile, as the stress of the downturn subsides, this group of investors have seen their wealth rise. Those with an emergency fund in place rose from 66% in March to 84% today. Those that had their income directly impacted by COVID fell from 54% in March to 35% today. And 57% said they have not changed anything about their current retirement plan while 29% say they plan to save more.
“Seeing more investors adding to their savings while mostly leaving their approach to retirement unchanged is exactly the balance we would hope to see,” wrote Betterment, in the report.
Maybe that’s an indication of rehiring. Maybe it’s an indication of spending less and saving more, a common theme among many consumers during the pandemic, since there’s less to do outside of the house.
Either way, the rise of the market has certainly attributed to this renewed sense of optimism and health over the past six months. The S&P 500 index has returned 4.95% this year, despite falling 34% in late February and early March, for example. Without the market’s recovery, this group wouldn’t likely feel so flush now.
The Other Side Of The Recovery
These findings from investors stand in stark contrast to broader surveys, showcasing a larger swath of financial security (or insecurity). A survey of investors, after all, presupposes enough income to put aside into the market.
Pew Research surveyed 13,200 adults in the US in August, finding that 25% of respondents had trouble paying bills on time. This was much more pronounced among Black and Hispanic people, with 43% of Black and 37% Hispanic respondents agreeing to the sentiment. Just 18% of White respondents did the same.
Unsurprisingly, the urge to pull from the investment accounts was also much greater among those that had lost a job. Of those that did lose their job or took a pay cut in the COVID response, 46% had pulled money from savings or investments. Only 17% did the same from those that didn’t lose their main form of income or see a job cut.
Meanwhile, a CNBC and Acorns survey found that 26% of those ages 25-to-34 had depleted their emergency savings. Food insecurity has also grown, according to Census data.
It’s also highlighted in the fact the market has climbed, while the total number of people still receiving unemployment benefits surpasses 8.3 million.
For those still able to invest as they did, prior to the pandemic, then it makes sense that they’re feeling more comfortable in the moment – even as much of the US waits for aid. That doesn’t mean, however, that even the secured investor thinks we’ve recovered.
Support For A Stimulus Bill Remains
There’s a potential for these conflicting reports to discourage or encourage more stimulus, at this point. But even 71% of those surveyed by Betterment, while feeling flusher, said they were unsatisfied or neutral on the stimulus program. While this split down partisan lines, 28% of Republicans were somewhat or very unsatisfied with the response so far.
House Speaker Nancy Pelosi (D-Calif) and the White House had tried to narrow in on a potential bill, after months of debate, but Senate Majority Leader Mitch McConnell (R-KY) reiterated the lack of support for another bill before the election. Congress has left Washington for the final week of campaigning, leaving any timeline for a second stimulus package very much in the air.
The delays may only lead to a widening of the two very different experiences in America’s recovery.