Americans have experienced extraordinary returns in the stock market over the past few years. The S&P 500 had nearly 30% gains in 2021, which is far higher than its typical 9% annual growth. For many Americans who have acclimated to double digit returns and confidence in their portfolio, 2022 may be a rude awakening — especially for younger generations who have benefitted from a bullish market most of their adult lives. Stock market volatility and inflation are taking center stage as the top issues we face in the years ahead.

We surveyed more than 1,200 Americans to uncover how they feel about the state of the economy and how they’re preparing financially for the years ahead. Nearly three-quarters of respondents (71%) ranked inflation among the top three issues they’re most worried about at the moment, which comes as inflation hits a four-decade record high at 7% this month. New COVID-19 variants, supply chain disruptions, and a stock market crash were the other top issues on the minds of Americans, while retirement and job security took a back seat.

We also found that more than half of Americans (52%) believe there will be a stock market crash in the next five years, which comes as the S&P 500 dipped into correction territory this week. Additionally, 58% of those respondents think a crash will impact their finances negatively.

Is there an upside to the dim outlook on the stock market?

Despite concerns around the negative impacts of a stock market crash, some Americans saw the financial gains that bold investors made from the 2008 stock market crash and are preparing to capitalize for the next one. Nearly three-quarters (71%) of investors who consider themselves aggressive believe that a stock market crash would benefit them financially – compared to just 20% of conservative investors. Further, 35% of people who think there’s going to be a crash in the next five years agree that they are waiting for a stock market crash to invest some extra cash.

In addition to aggressive investors, younger generations are also most optimistic about a future stock market crash. Although 33% of Gen Z and 31% of millennials said December 2021’s volatile market negatively impacted their finances, they are the most hopeful when considering how a crash could benefit them.

  • 41% of Gen Z and 36% of millennials agree that they are waiting for a stock market crash to invest some extra cash.
  • Another 30% of Gen Z and 28% of millennials are waiting for a market crash to begin investing altogether.
  • Nearly 40% for Gen Z and millennials are waiting for a housing market crash to buy a home.

In uncertain times, prep your finances to reduce financial anxiety

Fear of a stock market crash and the impact of inflation can keep you up at night, but there are steps you can take to secure your financial health and weather times of economic uncertainty — while also keeping your financial anxiety at bay. Read on for tips you can take action on today.

Inflation-proof your finances

The rate of inflation has been more or less stable at around 2% for the last decade, until now. With inflation reaching 7%, it’s important to put your money to work for you.

Here are a few steps you can take to inflation-proof your finances:

  1. Build an emergency fund: Your emergency fund should equal 3–6 months of your regular household expenses. This can help you bridge short-term gaps and handle surprises without turning to high-interest debt.
  2. Revisit your budget each year to account for inflation: Budgeting is an ever-changing picture of needs and cash flows. Creating a schedule of monthly, quarterly, and annual check-ins will keep you up to date with your spending, even in volatile markets.
  3. Maximize your retirement contributions: The more you can save for retirement, the better. Start by maximizing your contributions to your retirement plan (or plans) and taking full advantage of any matching funds from your employer.
  4. Consider investing in inflation-resistant bonds: Treasury Inflation-Protected Securities (TIPS) are government bonds that mirror the rise and fall of inflation and are a conservative investment that can grow with time.
  5. Shift into inflation-resistant markets: Invest in inflation-resistant markets, such as commodity resources companies like metal and agriculture, that tend to increase their prices naturally with inflation.

Opportunities to take advantage of in the market now

Don’t let your brokerage account being in the red discourage you — there are things you could be doing to make the most of your cash. Here are some strategies that could pay off in a volatile market:

  1. Take a page from the younger generations and diversify your investing options: It’s worth evaluating investment options you may not have previously considered, such as crypto and NFTs or disruptive tech companies. In fact, our survey found that 38% of Gen Z and 42% of millennials are likely to move money into an alternative investment like crypto or NFTs in the event of a crash.
  2. ​​Keep an eye on sure bets: Set up alerts to track and jump on opportunities to invest in blue-chip stocks and companies that deal with must-have commodities, especially if there’s a stock market crash.
  3. Evaluate real estate: If you can lock in fixed interest rates, investing in real estate can help you ride out periods of downturn in the market, as well as inflation.
  4. Invest in yourself: Aside from these financial moves, it’s always worth investing in yourself as well. During difficult market conditions, the way to secure your finances may be through improving your skills and education. Shifting to a more lucrative career path or entering a new role with more job security can remove a great financial burden from your mind.

It’s difficult to time the market — especially during times of volatility — but there are always tried-and-tested steps that your household can take to better secure your financial well-being. Above all, it’s important to be proactive, keep a pulse on your finances with personal finance tools such as Quicken and Simplifi, and stay educated on economic conditions.