After reaching a 20-year high in the first quarter, U.S. investor optimism tumbled in the second quarter amid mounting economic fallout from COVID-19. The Wells Fargo/Gallup Investor and Retirement Optimism Index, based on interviews conducted May 11-17, is now the lowest it has been since the fourth quarter of 2013. Yet, even as investors’ 12-month outlook for their own investments is down sharply, most remain optimistic about reaching their five-year investing goals.

“Investors are displaying remarkable resilience at an unprecedented time,” said Tracie McMillion, head of global asset allocation strategy for Wells Fargo Investment Institute. “Numerous trends in the poll confirm that investors view recent market disruption as episodic and temporary, not as a sign of systemic problems that will harm their investments in the long term or compel them to reallocate their assets.”

The Wells Fargo/Gallup Investor and Retirement Optimism Index fell 134 points in the latest poll to plus-4. This is by far the largest short-term drop for the index since its inception in 1996. Investor optimism dropped on all economic components of the index. However, consistent with the latest federal employment reports, optimism fell the most on unemployment (down 34 points), followed by economic growth (down 26 points).

On the personal items that make up the index, investors’ outlook for reaching their 12-month investment targets also fell sharply this quarter (down 32 points). At the same time, their longer-term outlook is intact, as two-thirds remain optimistic about reaching their five-year investment goals.

Despite this quarter’s unprecedented drop in the investor index, six in 10 investors continue to say now is a good time to invest in the financial markets.

Nearly seven in 10 investors currently feel very (21 percent) or somewhat (48 percent) confident about investing in the stock market as a way to build wealth for retirement. This percentage is unchanged from a year ago. Just 8 percent of investors see the current stock market environment as a time to decrease their stock holdings to protect against further losses. About half say it’s a time to hold what they have and wait for the market to come back, while 35 percent see it as a buying opportunity.

Thinking about the market outlook for the rest of 2020, about half of investors, 51 percent, are optimistic that the worst is behind us; 49 percent say the worst is yet to come.

Investors have not been unaffected by the effects of COVID-19 on the job market. As of the May survey, 27 percent of nonretired investors had suffered a loss of income or pay, 15 percent had been furloughed or temporarily laid off, and 1 percent had been permanently let go.

The coronavirus has also compelled one in four investors to take on more financial responsibility for family members. The largest percentage, 16 percent, reports providing greater financial assistance to an adult child, while 7 percent say they have assisted a parent, and 7 percent another relative.

On the plus side, the economic shutdown has caused most investors (64 percent) to spend less money than usual, and as a result, one-third say their savings increased during this period. A smaller percentage, 21 percent, say their savings decreased, while 46 percent say their ability to save has not changed.

Overall, about a third of all investors (32 percent) report that the economic disruption caused by the coronavirus has had a negative impact on their day-to-day financial security. This percentage includes 28 percent of retired investors and 35 percent of nonretired investors.

Looking ahead, 30 percent of employed investors say it’s very or somewhat likely they will delay the age at which they retire as a result of the recent economic downturn. A similar percentage, 29 percent, think it’s likely they will work more than they intended in their retirement.

The impact of the downturn has been especially pronounced on employed investors who are closer to retirement age — those aged 50 to 64. Forty percent of this group, compared with 22 percent of investors aged 18 to 49, says they are very or somewhat likely to work more than they intended to in retirement as a result of the market downturn. Older, nonretired investors are also more likely than those under 50 to say they will have to retire later than they originally planned.

“Feeling compelled to extend working years to offset losses is something many investors wrestle with — though it’s not always necessary,” said Dan Barry, regional president of Wells Fargo Advisors’ Gateway Region. “As history has shown, assets in a carefully constructed investment strategy often recover if you refrain from making emotional decisions. It’s about prioritizing what is most important, centering your investment strategy around these priorities, and making informed decisions.”

A majority of investors (64 percent) say setting aside more money in an emergency fund is a change they would make to their financial or investing strategy as a result of the coronavirus. Close to half say they are very or somewhat likely to spend more time creating a long-term financial plan.

“Whether it is the coronavirus or any other catalyst, market downturns are inevitable. It is a matter of when, not if, they will happen,” said Barry. “Having a comprehensive, long-term investment plan is critical to effectively weathering market downturns and preparing for the ‘what ifs’ of retirement.”

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