Americans Are Split on Their View of the Economy — and It’s Affecting Their Finances
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Gabrielle Olya
4 min read
Whether or not the economy is in a good place depends on who you ask. According to a new Edward Jones survey, Americans are split over how they view the current state of the economy — 45% are optimistic and nearly as many (42%) are feeling pessimistic. And Americans’ views of the economy are affecting their financial behaviors and the decisions they make with their money, the survey also found.
Why Americans Are Split on the State of the Economy
Some Americans have been more affected by changes in the economy than others, and those who have felt the negative effects firsthand are more likely to have a negative outlook.
“Investors have been faced with disruptive conditions over the past year, and some may be feeling a greater impact from inflation, rising interest rates or employment uncertainty,” said Mona Mahajan, senior investment strategist at Edward Jones. “The pandemic also brought about a change in perspective for many investors with an increased focus on health, family and purpose in tandem with their finances.”
Those who view the economy pessimistically are most concerned about the rate of inflation (83%), supply-chain issues (77%), employment rate (71%) and interest rates (71%).
Americans Who Are Concerned About the Economy Are More Likely To Change Their Financial Behaviors
The survey revealed a correlation between concern and action. The more concerned adults are with economic conditions, the larger the impact those concerns have on their financial decisions. In fact, 2 in 5 U.S. adults (41%) have considered the rate of inflation when making financial decisions in the last nine months.
“For many investors, concern about broader economic trends can cause anxiety around personal finances,” Mahajan said. “Investors will often want to take action in their investment portfolios, for better or worse, to alleviate these feelings. Our survey found that 1 in 5 Americans (21%) admit to making emotional decisions when it comes to their personal finances. This figure is even higher (37%) for Gen Z investors. However, those emotional reactions may lead to financial decisions that ultimately don’t serve the investor’s best interest.”
Mahajan cautions against allowing your fears about the economy to lead you to make rash investing decisions.
“The disruptive conditions of the economy can make people reconsider investments and drive emotional changes to buy or sell, so it’s important, when possible, to consult with a financial advisor for advice and to develop a long-term financial strategy,” she said.
Should You Reevaluate Your Financial Decisions in the Current Economy?
While you shouldn’t make emotion-based decisions, there may be some financial changes that would be beneficial for you in this current environment. The key is to be well informed before making any of these money moves.
“We found that trusted financial advisors can play a key role in building financial knowledge and confidence — two important pieces of building financial resilience,” Mahajan said. “Often, investors make changes to their portfolios that are not in their best interest just to satisfy the need to do something — financial advisors can help determine when and how to act. If you are concerned about the economy, this might be a good time to invest in your financial education and consult with a financial advisor to help navigate current economic conditions.”
Smart Moves Everyone Should Be Making in This Economy
While the best financial strategy in the current economy will depend on your individual circumstances, there are some things everyone should consider doing right now. The first is to stick to your long-term goals.
“It’s important to focus on long-term goals and create a financial strategy to achieve them,” Mahajan said. “Many times, not having a sound decision-making process in place can result in impulsive reactions to the news of the day. With a plan in place, it’s easier to stay on track and not allow market fluctuations to lead to rash decisions.”
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It’s also a good idea to consult with a financial advisor.
“Those surveyed indicated working with a financial advisor can help them feel less stress (25%) and frustration (16%), and also ease anxiety (72%) and concerns (61%) around financial decisions,” Mahajan said.
Finally, you should maintain a diversified portfolio and review your objectives regularly.
“Having a diversified portfolio, and one that you can review on an ongoing basis, is key to driving stability and personal finance knowledge,” Mahajan said. “While diversification can’t protect against loss, it can help reduce risk and build financial ease.”
