Trust in the U.S. financial system sank to 20% this quarter on concern about the Japan earthquake and further stock market turmoil, and even the most affluent American investors have not been spared from worry about where the economy is headed, recent studies show.
According to the Chicago Booth/Kellogg School Financial Trust Index released Thursday, trust in America’s financial system tumbled to 20% from 26% in the first quarter. Americans’ overall trust fell to levels last seen during the earliest months of the financial meltdown, at 20% in December 2008 and 19% in March 2009, the report conducted in March with 1,007 respondents by Social Science Research Solutions shows.
Meanwhile, the MFS Investment Management Investing Sentiment Survey released Monday shows that “mass affluent” investors have pessimistic attitudes and behaviors toward investing that may not match the reality of their financial positions. A total of 59% agreed with the statement: "I am more concerned than ever about being able to retire when I thought I would," with only 16% disagreeing.
The pessimism is due to the lasting impact of 2008's financial crisis and concerns over potential reductions in Social Security, both of which could impact investors' ability to retire, according to the MFS survey. The survey was conducted by Research Collaborative of 596 individuals with over $100,000 in investable assets and 610 licensed financial advisors. MFS defines mass affluent investors as having between $100,000 and $1 million in household investable assets.
The Booth/Kellogg survey’s authors noted that the survey was conducted shortly after the earthquake and Fukushima Daiichi nuclear plant disaster in Japan, which likely contributed to the decline in financial trust. Also, the authors believe that the corresponding drastic stock-market drop might have affected Americans’ level of trust.
“The latest findings show how fragile and temperamental the country’s financial system is right now, even as we slowly climb out of the recession,” said Luigi Zingales, professor of entrepreneurship and finance at the University of Chicago Booth School of Business, one of the survey’s authors. “This drop in trust offers some insight into how global catastrophes can affect Americans’ trust in the financial institutions where they invest their money.”