Banking crisis did little to tank confidence. It was already in the toilet.
In the wake of the banking crisis earlier this month, financial planners and wealth advisers reassured clients by email and in phone calls that this turmoil wouldn’t spiral out of control, that their investments were safe.
"We have been posting on social media and making outbound calls to our clients telling them not to expect the failures of a few U.S. banks to cause a widespread financial contagion," Jon Ulin, CEO of Ulin & Co. Wealth Management, told Yahoo Finance.
Several fintechs quickly rolled out increased insurance on deposits beyond the traditional $250,000 guaranteed by the FDIC to attract jittery savers. And smaller banks upped their yields on their deposit accounts to keep customers happy.
They all looked to get ahead of an event they assumed would spook Americans — which appears to not have happened to a great extent, the latest data showed.
This week, an index measuring Americans’ sentiment for the present economy dipped in March, interrupting a three-month streak of increases. But overall, consumer confidence increased during the month, according to the Conference Board survey conducted 10 days after the bank troubles began, led by improved expectations for the future.
Still, that doesn’t mean Americans had their hands over their eyes as the banking turmoil unfolded. Nor does it mean they feel upbeat in general about the economy. The index remains at a reading that often signals a recession is coming in the next year, a level the index has been at for 12 of the last 13 months.
"I am seeing that a large number of [clients] are afraid of their retirement plan, they are afraid of what is going to happen to their jobs," Kathryn Keane, an enrolled agent and National Tax Practice Institute fellow, said. "Just everybody seems to be worried. It's just very uncomfortable is how I would put it.”
Most Americans weren't ignorant of the troubles enveloping regional banks this month.
Only 17% did not see, read, or hear about the collapse of Silicon Valley Bank (SVB), a study conducted March 22-23 by the Harvard Center for American Political Studies found, with the remaining 83% of respondents reporting they had been exposed to the banking drama to varying degrees.
While many didn’t expect the events to affect them directly, 29% did think there could be some impact to them personally and a third worried about frozen bank deposits, the survey data showed.
“Incoming phone calls from clients this week have had less anxiety on the SVB-led banking crisis going viral and throwing the economy into a tailspin, and greater concern if their cash and investments at our independent custodians may have any underlying risks to consider,” Ulin said.
Recent developments also shook confidence in the banking industry as a whole. Only 10% of Americans polled by The Associated Press-NORC Center for Public Affairs Research said they trust banks and other financial institutions, a sharp decline from 22% in 2020.
Marguerita Cheng, CEO of Blue Ocean Global Wealth, saw this firsthand with her own mother.
“Yes, I took the time to explain to my mom,” Cheng wrote to Yahoo Finance about the tumult. “I think what is really shocking is Credit Suisse, because Swiss banks have a reputation for keeping assets safe and secure.”
Still, overshadowing the banking crisis was Americans' ongoing unhappiness with rising prices. More than 35% of adults named inflation as the biggest issue facing the country today, according to the Harvard poll, the issue that garnered the highest percentage.
"It really has been more focused on the fact that inflation is where it is," Akeiva Ellis, a certified financial planner, said about overall sentiment.
Survey data from the Conference Board this week also suggested that inflation is weighing on Americans.
Many plan to cut back on discretionary spending over the next six months: 36.6% expect to spend less on gambling and lotteries; 34.1% expect to spend less on museums; and 33% expect to spend less on amusement parks. Almost a third expect to spend less on movies (32.2%) and travels (31.9%).
It “does bother investors that the markets and their returns have not kept up with [inflation] over the past year,” Ulin said. “They are anxiously waiting for the next bull market to commence.”
Kerry Hannon contributed to this report.
Rebecca is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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