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Looking up september_6_2011

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  • 1. Yankelovich MONITOR Minute Looking Up Edition September 6, 2011This week’s question:“What is the one thing unnerving my customers the mostthese days?”The answer is volatility. Volatility has made a comeback capricious. With much of the middle class sappedas the backdrop to everyday life. A chart in a post in of buying power and teetering a mere rainy day fromyesterday’s Wall Street Journal Real Time Economics blog financial ruin, consumers are hunkering down. Remedialprovided a clear picture of the economic volatility now governmental actions have been stymied by a paralyzingroiling consumers. It plots the average daily movement political stalemate. All the while, emerging economies likein the Dow Jones index of US stocks back to the mid- China, India and Brazil are nervously eyeing the sagging1980s. The return of stock market volatility is evident fortunes of developed markets, the US in particular, to seethroughout 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. Bythe 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 hadCoupled 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 frommany developed economies, and worries that important Ben Bernanke (then a Federal Reserve Governor, nowdeveloping markets like China and Brazil are bubbles Chairman) in a 2004 speech in which he summed upwaiting to burst, it is no surprise that many experts, and the consensus opinion of economists by famouslyconsumers, too, have come to feel that volatility is the new characterizing the preceding 20-year-plus period as thenormal. Great Moderation.The everyday experience of volatility is more than Perhaps the biggest impact of the Great Moderation wasfinancial, though. Suddenly, life as a whole seems more the moderating, confidence-inspiring context it providederratic, more fragile, and even more menacing in the for everything else. After all, it’s not as if the two-plusface of ominous volatile lows. Such dread was heard as decades of the Great Moderation were free of worrisomeHurricane Irene churned up the East Coast, hard on the events. Yet, as challenging as it was, this period was metheels of record summer heat, a rare earthquake in the with an underlying sense of confidence that solutionsmid-Atlantic states the week before, and two winters of were at hand. This was exemplified by the resiliencerecord snowfall. With the storm approaching, people were and stability of the global economy, something thattweeting 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, hadordinary 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 moreThe August 2011 jobs report for the US registered zero vulnerable and are acting accordingly. Marketers willgrowth, 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. Goingthey cannot come up with $2,000 in 30 days to cover an forward, the whole pyramid of engaging consumers aboutunexpected emergency expense. higher-order (premium-priced) needs will require a firmer foundation in security.The financial frailty of the middle class aggravates thefeeling that life has become ever more volatile and© 2011 The Futures Company. All rights reserved. | 1