Investing is a core component of building wealth over the long term. However, a new survey from MagnifyMoney reveals a concerning, yet common, sentiment: Many consumers do not trust the stock market.
Our survey of over 1,000 Americans found that only 17% of consumers completely trust the stock market – a figure that plummets to just 5% among women. Another worrisome finding our survey uncovered is just how deeply the COVID-19 pandemic has exacerbated distrust in the market. Here’s what we found.
Despite the fact that every decline in the stock market has eventually recovered and the S&P 500 has actually gone up more than 2,700% since 1970, many consumers do not trust the stock market. In fact, our survey found that a staggering 34% of people do not really trust the stock market, compared to just 17% who said they trust it completely.
That distrust deepens when comparing men to women. While 22% of men said they do not really trust the market, that number jumps to a whopping 48% of women. As investing is a key piece of building wealth, this is especially concerning when considering the existing wealth gap between women and men.
Our survey also found generational differences in terms of trust in the stock market. Interestingly, we found that baby boomers were the generation with the highest level of distrust, with 49% saying they don’t really trust the market.
Other demographics with higher levels of distrust in the stock market include Democrats – 40% said they do not trust the market compared to just 25% of Republicans – and households with lower incomes, including 45% of households making less than $25,000. Meanwhile just 15% of six-figure households don’t really trust the market.
Despite the pandemic resulting in a ricocheting stock market, our survey found that nearly half of consumers (49%) said that the COVID-19 crisis has not changed the level of trust they have in the stock market. Still, 33% said the crisis has indeed caused them to trust the stock market less, followed by 18% of consumers who said that the crisis has actually caused them to trust the stock market more.
One group that has been particularly distrusting of the stock market amid the coronavirus crisis, understandably, those who have been adversely affected by it. Our survey reveals that half of those (50%) who have been laid off or furloughed due to the pandemic, trust the stock market less because of their situation.
Interestingly enough, though, we found that those struggling financially are not the only ones that lack trust in the stock market. In fact, a staggering 50% of six-figure households said that the pandemic has caused them to trust the stock market less, too.
One potential reason for such high levels of distrust in the stock market across a variety of demographics could be the constant volatility the market has experienced since the coronavirus outbreak hit.
With general distrust in the stock market running rampant, our survey aimed to find the root cause of this lack of confidence. We found that the most prevalent factor is simply confusion over how the market works, with 32% of people citing that as the aspect of the stock market they find the most untrustworthy. Notably, only 12% of respondents said that they do not find any part of the market untrustworthy.
Our survey found that consumers not only have a general distrust of the stock market, but the experts who dole out investing advice, too. Overall, we found that 24% of people do not really trust the Wall Street analysts who provide reports about a company’s performance and make stock recommendations.
There were some striking differences in the level of trust in Wall Street analysts across different demographics. Of Democrats, 26% say they do not trust analysts compared to only 18% of Republicans. Across income brackets, 28% of those who make less than $25,000 cited a lack of trust compared to only 15% of six-figure households.
Instead, most consumers (28%) cited financial advisors as the financial source they find the most trustworthy. However, in the second-most common response (23%), consumers said they found none of the options – including sources like government institutions and financial institutions – to be trustworthy.
We found that women are particularly untrusting of financial sources, with 36% saying they do not trust any financial source (compared to just 11% of men). We also noted this trend among households making less than $25,000, with 39% not trusting any financial source compared to just 8% of six-figure households.
The general level of distrust in the stock market and analysts on Wall Street helps make sense of another finding revealed by our survey: A large chunk of consumers (32%) think that the stock market and Wall Street needs more government regulation. In fact, that sentiment even stretches across party lines, with 38% of Republicans and 37% of Democrats supporting added regulation.
For its survey, MagnifyMoney commissioned Qualtrics to conduct an online survey of 1,010 Americans, with the sample base proportioned to represent the overall population. We defined the generations as the following ages in 2020:
The survey was fielded July 24-26, 2020.
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