1. Yankelovich
MONITOR Minute
Looking Up Edition
September 6, 2011
This week’s question:
“What is the one thing unnerving my customers the most
these days?”
The answer is volatility. Volatility has made a comeback capricious. With much of the middle class sapped
as the backdrop to everyday life. A chart in a post in of buying power and teetering a mere rainy day from
yesterday’s Wall Street Journal Real Time Economics blog financial ruin, consumers are hunkering down. Remedial
provided a clear picture of the economic volatility now governmental actions have been stymied by a paralyzing
roiling consumers. It plots the average daily movement political stalemate. All the while, emerging economies like
in the Dow Jones index of US stocks back to the mid- China, India and Brazil are nervously eyeing the sagging
1980s. The return of stock market volatility is evident fortunes of developed markets, the US in particular, to see
throughout the mid-2000s. It really takes off after the if their exports will continue to find buyers.
economic meltdown of late 2008 and only gets worse. By
the measure shown in this chart, last month, August 2011, Of course, life has never been free of ups and downs.
was the 10th most volatile month in the past 75 years. But before the economic upheaval of 2008 it was widely
believed that volatility of the sort now worrying people had
Coupled with roller-coaster prices for oil, food and other been tamed, particularly in the realm of macroeconomics.
commodities, the currency and debt risks plaguing The best-known expression of this belief came from
many developed economies, and worries that important Ben Bernanke (then a Federal Reserve Governor, now
developing markets like China and Brazil are bubbles Chairman) in a 2004 speech in which he summed up
waiting to burst, it is no surprise that many experts, and the consensus opinion of economists by famously
consumers, too, have come to feel that volatility is the new characterizing the preceding 20-year-plus period as the
normal. Great Moderation.
The everyday experience of volatility is more than Perhaps the biggest impact of the Great Moderation was
financial, though. Suddenly, life as a whole seems more the moderating, confidence-inspiring context it provided
erratic, more fragile, and even more menacing in the for everything else. After all, it’s not as if the two-plus
face of ominous volatile lows. Such dread was heard as decades of the Great Moderation were free of worrisome
Hurricane Irene churned up the East Coast, hard on the events. Yet, as challenging as it was, this period was met
heels of record summer heat, a rare earthquake in the with an underlying sense of confidence that solutions
mid-Atlantic states the week before, and two winters of were at hand. This was exemplified by the resilience
record snowfall. With the storm approaching, people were and stability of the global economy, something that
tweeting and repeating the same refrain, “What’s next? leading economists believed modern economic theory,
Locusts?” (Prominent media figures did it no less than known colloquially as the Washington Consensus, had
ordinary people. Katie Couric tweeted this refrain; Brian engineered to last.
Williams repeated it on the NBC evening news.)
With volatility amped up, consumers now feel much more
The August 2011 jobs report for the US registered zero vulnerable and are acting accordingly. Marketers will
growth, the first such stall since 1945. A large swath find a much more vigilant consumer in the marketplace.
of middle-class Americans fall into the half considered Vulnerable consumers are on the lookout for products
“financially fragile” because, short of extreme measures, and services that address their need for vigilance. Going
they cannot come up with $2,000 in 30 days to cover an forward, the whole pyramid of engaging consumers about
unexpected emergency expense. higher-order (premium-priced) needs will require a firmer
foundation in security.
The financial frailty of the middle class aggravates the
feeling that life has become ever more volatile and
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