This Is Why Market Volatility Feels Personal Even If You Don't Invest
Though the headlines yell about plunging stocks or investors losing billions, you’re unbothered. After all, you’re hardly a wealthy trader on Wall Street. You don’t even own a brokerage account. But you’re still impacted by market volatility — even if you don’t invest.
In reality, stock market turbulence can ripple through your finances and your daily life alike. Curious about why the ups and downs of the market still feel so personal for non-investors, MoneyLion turned to experts for insight.
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Your Retirement Fund Is in the Market
Alex Langan, chief investment officer and financial advisor at Langan Financial Group LLC, wanted to clear up one important misconception: “A lot of people who say they don't invest actually do,” Langan said. “If you have a 401(k) through your employer, you're in the market.”
Do you have a pension? Langan reminded you that the fund behind that pension is invested in the market. He added that anyone who has any kind of retirement savings plan should know that it is almost certainly tied to market performance in some way.
“For the significant portion of Americans who do have 401(k) plans or retirement accounts and may not think of themselves as investors, volatility shows up directly on a statement that suddenly looks very different,” Langan said.
Impacts on Consumer Confidence Can Have a Ripple Effect
Langan also pointed out that bad news about the market can shake consumer confidence, which he called “one of the most powerful forces in the economy and one of the least appreciated.” When consumer confidence drops, the effects can extend into your personal life.
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Consider this: When people see scary headlines about the market, they feel uncertain about the future. Langan said this fear can look like pulling back on bigger purchases and spending less money overall. People may be more inclined to hold onto their cash. And when enough people exhibit these behaviors at the same time, it can become self-reinforcing.
“Businesses see slower sales, so they hold back on hiring and investment, which makes workers less confident, which leads to more cautious spending, and so on,” Langan said. “This negative feedback loop doesn't require anyone to have personally lost money in the market to take hold. The headline itself is enough to start the cycle.”
Langan added that when consumer confidence falls, you’ll see it in retail sales, restaurant traffic, home purchases and other areas of spending.
Crucially, businesses may also respond to choppy markets and changing consumer behavior. They may slow down, delay expansion or pause hiring.
“None of that requires a person to own a single share of stock to feel the effects,” Langan said. “It shows up in fewer job openings, slower wage growth and, in some cases, layoffs.”
The Prices of Everyday Goods Can Go Up
For Cara Macksoud, financial behavior specialist and CEO of Money Habitudes, market volatility can impact the broader economy in ways that people who’d never consider themselves wolves of Wall Street can feel every time they perform a basic task — like filling up their gas tank.
“Take gas prices as an example. Most of us pass a gas station every day,” Macksoud said. “We can literally watch prices move up or down in real time. There are very few things in life where we get a daily reminder of economic change.”
Macksoud also said consumers can see the impact in housing costs. Though renters may only feel the burden once a year, they still may associate economic uncertainty — which can be reflected in market volatility — with higher costs.
“Over time, many people have learned to connect market turmoil with the fear that life is about to get more expensive,” Macksoud said.
The Psychological Component Is Very Real
Macksoud explained that there is also a psychological component to market volatility that everyday people can feel in unexpected ways. When the media fixates on market chaos — think back to 2008 or even the early days of COVID-19 — the headlines become so constant that people can feel overwhelmed or anxious.
“Even people with no investments begin to feel like something is wrong because uncertainty itself is contagious,” Macksoud said.
While investors may understand that downturns can be followed by recovery, Macksoud added that non-investors lack that context, “so all they experience is the fear.”
The Bottom Line
Rocky days on the market can feel surprisingly personal — even if you’ve never bought a single stock — because they can create a sense of anxiety and uncertainty that touches multiple aspects of your daily life, from job security to everyday spending.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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