A significant number of investors are still keeping their money out of the market because of recession fears, according to a new study from Minneapolis-based Allianz Life Insurance Company of North America. 

Of more than 1,000 investors over the age of 18 surveyed for Allianz’s 2023 Q2 Quarterly Market Perceptions Study, 66% said they are keeping their money on the sidelines out of fear of losing it.

Those fears are focused primarily on the potential of a recession, as 64% are worried that a recession might be just around the corner. That represents an increase from the previous quarter, when only 57% were concerned, and the fourth quarter, when 62% were worried, the study said. 

In general, the older generations are the most worried, with 67% of baby boomers saying a recession is imminent compared with 61% of Generation X and 63% of millennials, the study found.

By keeping their money out of the market, investors could be missing out on significant opportunities, said Kelly LaVigne, vice president of consumer insights at Allianz Life.

“If you miss a couple of the big recovery days as history has shown us, it will take you a heck of a lot longer to recover from any substantial loss,” he said. “Missing out on these big recovery days can really draw out your own personal recovery from the loss that you experienced in the market.”

Failing to capitalize on those sudden jumps in the market is representative of what LaVigne described as a “hidden loss” and something advisors should be talking to their clients about, especially those afraid to get back into the market.

“The hidden loss is the most difficult to explain—that the recovery in the markets isn’t a straight line and it certainly isn’t as quick as what the drops are,” he said.

The dramatic change in interest rates has impacted investors differently, the study found. Of the investors surveyed, 61% said they took a loss in the past 12 months due to rising interest rates, while 38% said they benefited financially because of the increase in interest rates over the past year.

The schism represents the difference between a debtor and a saver, according to LaVigne. In the case of the former, they are living paycheck-to-paycheck with a limited surplus. That means when they spend money, they tend to use a credit card, LaVigne explained. 

Savers meanwhile continue to put money into traditional fixed products including CDs or municipal products, because they are able to offer more attractive rates. In addition, a number of fixed index annuities are offering rates that have not been seen in years, he added. Meanwhile, debtors have seen their credit card debts grow due to higher interest rates.

The study also found that 80% of respondents said they are worried about the future of Medicare and Social Security. Members of Generation X are the most concerned, with 86% of that group expressing worries, compared with 79% of millennials and 79% of boomers.