Eurozone Crisis Has U.S. Consumers Seeking Financial Safety

Upheaval in the Eurozone has begun to impact consumer activity in the United States, as U.S. government bond yields have reached new lows and major stock indexes continue to dip.

More than any direct effect on the U.S. economy or the operations of financial institutions, the Eurozone situation is manifesting itself in the U.S. in the form of concern among consumers for the safety of their money and the stability of the economy.

American consumers are tending toward risk-aversion, and record-low yields on government bonds reflect that trend. The yield on the key 10-year Treasury note fell to 1.54 percent this morning as traders moved money into U.S. government bonds, which are considered to be extremely safe investments. Increased demand for bonds decreases their yield, and German government bond yields, also seen as safe, have fallen recently as well.

The Dow Jones industrial average, meanwhile, was down nearly 6 percent as of Wednesday for the month of May. The last time the market reflected a losing month was September 2011.

“Everything right now is consumer-driven,” said Northwest Credit Union Association (NWCUA) CEO John Annaloro. “People are moving their money based on a desire for safety.  Credit unions have an opportunity—and a responsibility—to provide U.S. consumers with a safe haven.  For more than one-hundred years in the United States, credit unions have been the alternative to banks, where operations inspire confidence during difficult economic times.”

The consumer trends stateside, with a movement away from the stock market and other investments with a modicum of risk toward ultra-conservative investments, are mirroring those in Europe, where traders are moving to the perceived safety of Germany, buying up German bonds and shifting deposits away from countries like Greece, Spain and Portugal that are currently considered risky.

“People are very wary right now,” said David Bennett, director of public relations for the NWCUA. “Whether or not the situation in Europe has any direct impact on the U.S. economy, public perception is again creating a consumer movement toward safe investments and conservative money management. Credit unions should emphasize their safety and soundness in order to be seen as part of that safe, conservative sector that is capable of safeguarding consumers’ money.”

 

Questions or Concerns? Contact Matt Halvorson, Anthem Editor: mhalvorson@nwcua.org.

Posted in Economy.