ETF savings boom untested by a prolonged bear market

On April 2, 2025, an announcement of US tariffs triggered a sharp global market selloff. Major US and European indices recovered within a month. During that episode many retail investors in continental Europe increased ETF purchases rather than pausing contributions, according to data from a large digital wealth manager. The firm reports that about 70% of its clients hold at least one ETF, ETFs represent roughly 70% of client assets, more than 80% of those ETF assets are in broadly diversified equity indices and 90% of ETF investors hold at least one world ETF. Christian W. Röhl, the firm’s chief economist, said clients “viewed the lower valuations as a buying opportunity” and added that the ability to hold through a sustained drawdown is a different test of investor discipline.

Monthly ETF savings-plan activity in continental Europe has expanded rapidly in recent years. A regional study recorded 2.5 million monthly plans in 2020, 6.6 million in 2022, 10.8 million in 2024 and 15.1 million in 2025. Activity more than doubled between 2022 and 2025 and rose roughly sixfold since 2020. Some industry forecasts project the number of plans exceeding 50 million by 2030.

Recent market history provides limited experience of long downturns for many new savers. The 2020 pandemic decline lasted 33 days; the 2022 inflation-driven bear market lasted 282 days. The April 2025 correction recovered within weeks and did not reach bear market territory.

Broader financial conditions have changed. Global public debt stood near 94% of GDP in 2025 and the International Monetary Fund projects it could reach about 100% by 2029, warning that structural shifts in sovereign debt markets are increasing vulnerability to repricing. The US 10-year Treasury yield moved above 5% in 2025, its highest level since roughly 2007; rising yields can place downward pressure on equity valuations.

A fixed-income ratings director at a major data provider said markets are adjusting from an era of exceptionally low yields to one of higher inflation uncertainty, larger fiscal deficits and less central-bank support. She noted that when inflation dominates, “stocks and bonds can fall together,” and added that higher starting bond yields mean income can provide a cushion against volatility. She recommended diversification and a long-term focus for investors.

Products that aim to limit downside through ETFs have trade-offs. The global head of ETFs at an asset manager described buffer ETFs that absorb a defined initial decline-an example being protection for the first 15% of losses-after which losses resume; if the reference index falls 30% in an outcome period, an investor could still face a 15% loss. He said full-protection ETFs can shield investors from the entire decline, gross of fees, if entered near the starting level and held through the outcome period, but those funds cap upside returns. “The less protection, the higher the upside cap, and vice versa,” he noted.

The April 2025 episode provided data on investor behavior in a short correction but did not replicate conditions of an extended bear market. With a large increase in new ETF savings plans since 2020, many European savers have limited direct experience of prolonged market declines. Industry data and market participants point to diversification, income-oriented bonds or protection ETFs as available approaches, each involving different costs and potential outcomes.