February 21, 2024

Millennials were more likely than any other generation to flee the stock market during last year’s slump. That means they are also more likely to miss subsequent rallies.

Those are the findings of a survey released Monday by Ernst & Young’s wealth management arm that found nearly half of millennial respondents were turning to cash amid market volatility. In contrast, only 34% of Gen Xers and 24% of Baby Boomers seek the safe haven of cash.

The survey of more than 2,600 customers was conducted between October and November, just as the stock market bottomed out. Since hitting a low on Oct. 12, the S&P 500 has risen about 16%.

Cash is gaining popularity despite the stock market rally. Vehicles such as high-yield savings accounts, money market funds and certificates of deposit are delivering attractive returns for the first time in years amid the Fed’s aggressive rate hikes.

Goldman Sachs’ popular high-yield Marcus account recently raised its rate to 3.9%.

Still, there’s a lot of debate about whether these products can compete with inflation and the stock market. There’s a downside to getting money out of stocks, too: Over the two decades through 2022, investors who were absent from the S&P 500’s best-performing 10 days earned more than was in the market for the entire period, according to JPMorgan Asset Management. half of those.

Mike Lee, global wealth and asset management leader at EY, said baby boomers were more likely than millennials to work closely with financial advisors, which may encourage them to continue investing during periods of market volatility. They may have a stronger appetite for market volatility after observing past market recoveries, including the rebound after the 2008 financial crisis, he said.

EY Global Wealth & Asset Management sees more clients likely to flock to cash. “If volatility persists, a larger proportion of customers (43%) will further increase their savings and deposit exposure,” the report said.

The survey used the following age definitions: Millennials (ages 21-41), Generation X (ages 42-57) and Baby Boomers (ages 58 and over).