The lockdown caused by the Covid-19 pandemic changed people's saving behaviour – more available financial resources were redirected into shares and investment funds. As part of an Allianz Research and Euler Hermes analysis covering 6 countries: Germany, France, Italy, Spain, Austria and the USA, a significant year-on-year increase in net asset purchases was demonstrated.
- In Germany, France, Italy, Spain, Austria and the USA, the total net asset purchases on the capital market increased. In Germany by 35% and by as much as 223% in Italy.
- In most of the surveyed countries, during the Covid-19 pandemic, the share of shares and investment funds in new savings rose – Germany (from 15% to 24%), France (from 3% to 11%), Austria (from 20% to 25%). Only in the USA did the share of shares and investment funds in new savings fall, but the total assets increased by 25%.
- At the same time, 40% of respondents in Italy, France and Spain want to buy fewer shares after the pandemic ends than before. Only around a dozen percent declare increased engagement in shares.
- The majority of respondents (59%) believe that low/negative interest rates will persist much longer than previously expected. Only 10% expect them to rise, and 31% expect no changes.
- Although the past year was marked by uncertainty on the markets, most respondents would not want to increase their existing scope of insurance protection.
- The Allianz Research and Euler Hermes survey shows that the pandemic does not appear to have a breakthrough and lasting impact on investment decisions.
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Chart 1 - Percentage year-on-year changes in the volume of financial assets acquired in H1 2020[/caption]
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Chart 2 - Percentage share of shares and investment funds in total savings[/caption]
More shares and funds in savings
Taking the above data into account, Allianz Research and Euler Hermes simultaneously investigated whether the change in saving preferences was caused by extraordinary circumstances or by the beginning of a lasting shift towards riskier products. Participants in a survey conducted in Germany, France, Italy, Spain, Austria and the USA were asked: "As far as your investments in shares are concerned, would you like to buy fewer, the same number or more shares after the pandemic ends?" The responses show that in practically all seven countries, respondents stated that they want to invest in shares to the same extent as before the pandemic. Only 25.8% of surveyed Americans showed increased interest in saving through stock market investments (Chart 3).
In Europe, the stock market has not yet made up the losses incurred in March 2020. Therefore, it is not surprising that respondents from European countries show less enthusiasm for investing in shares in the future. Consequently, only a small percentage of respondents would like to "reach for the profits" currently offered by the stock market, from 12% in Italy to 15% in France. However, the most surprising is the high proportion of respondents (over 40%) in Spain, France and Italy who plan to buy fewer shares than before. Meanwhile, respondents from Austria, and especially Germany, are less inclined to limit their engagement in the capital market.
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Chart 3 - Interest in shares by country after the Covid-19 pandemic[/caption]
Low interest rates for longer
How saving during lockdown changed the market
How saving during lockdown changed the market
The majority of respondents (59%) believe that low/negative interest rates will persist much longer than previously expected. Only 10% expect that Covid-19 will accelerate the exit from the low interest rate environment, while 31% expect no changes in the existing monetary policy. The differences between individual countries are quite unusual. Respondents from Germany and Austria show high pessimism. On the other hand, French and American respondents are somewhat more optimistic. In the case of the USA, such an approach is understandable, as the US Federal Reserve was able to raise interest rates several times over the past decade (Chart 4).
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Chart 4 – Expectations regarding the duration of the low/negative rate of return environment after the Covid-19 pandemic[/caption]
No growth in interest in insurance
Covid-19 exposed the fragility of our modern lives and revealed glaring gaps in protection. In this context, one would expect an increase in risk awareness and demand for risk protection. However, the Allianz Research and Euler Hermes study once again dispels these hopes – the majority of respondents would like to maintain their existing scope of insurance protection. To better understand future demand for risk protection, the question was asked: "As far as your insurance is concerned, would you like to reduce the scope of your insurance protection, maintain it or increase it when the pandemic ends?" The preferred option among respondents is a return to the pre-crisis insurance level. However, the countries that suffered most from the pandemic have the highest level of interest in increasing insurance protection: the United States (18%), Spain (16%), France (15%) and Italy (11%). In the United States and Spain, there are more of these respondents than those who say they would like to reduce their insurance protection, albeit by a small margin. Austria (7%) and Germany (8%) show the least interest in increasing the scope of insurance protection.
The pandemic as a temporary shock
It is surprising that a significant number of respondents, especially in Italy (24%) and France (21%), would like to reduce the scope of insurance protection they had before the pandemic. In Austria and Germany these figures are lower, but even so there were more such responses than those indicating an increase in the scope of insurance. Over the past nine months, therefore, risk awareness has not increased everywhere.
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Chart 5 – Interest in risk insurance after Covid-19 by country[/caption]
Another conclusion – the pandemic appears to have a less lasting impact on investment decisions than many observers assume. Many respondents seem to perceive Covid-19 as a temporary shock that will pass without causing any changes in plans, routine or preferences.
Summary
The Allianz Research and Euler Hermes analysis in six countries shows that the Covid-19 pandemic changed the structure of savings – the share of shares and investment funds increased, especially in Germany, France and Austria. At the same time, over 40% of respondents from Italy, France and Spain plan to reduce share purchases after the pandemic. Most respondents expect low interest rates to persist for a long time.
Despite the crisis, respondents do not intend to increase insurance protection – the countries most affected by the pandemic (USA, Spain, France) show the greatest interest. According to the authors, the pandemic is perceived as a temporary shock, with no lasting impact on investment preferences.
