Market volatility and concerns about the impact of the national debt ceiling agreement have made many investors more averse to equities, according to a new report.
Boston-based John Hancock Financial, a unit of Manulife Corp., published this finding in a summary of results of a third quarter survey of investors’ views on investment choices, life goals and economic outlook. Conducted by the independent research firm Mathew Greenwald & Associates Inc., Washington, D.C., the poll surveyed 1,005 investors who have a household income of at least $75,000 and assets of $100,000-plus.
For the third quarter of 2011, the John Hancock Investor Sentiment Index score is +10, a significant drop from the +18 score in the year’s second quarter and from the +22 score of the inaugural index in Q1 2011, the report says.
Fewer than four in ten investors surveyed feel they are in a better financial position now than they were two years ago, in the middle of the recession, while the share of investors who feel they are worse off has risen.
However, most have not made changes to their investment programs. Virtually all (95%) describe themselves as long-term investors, and nearly as many (89%) feel they are savings-oriented.
A strong majority still believe that now is a good time to be contributing to defined contribution/401(k) plans (66%), or to IRAs (67%). This is, however, lower than in Q2 when the figures were 80% and 79%, respectively, the survey finds.
Regarding stocks, just two out of every five investors think that now is a very good or good time to invest in stocks (41%) or stock mutual funds (38%), compared to Q2 (58% and 53%, respectively). Balanced mutual funds and ETFs have also lost appeal, dropping to 42% now for balanced funds from 54% in Q2, and to 24% for ETFs from 32%.
Seventy-three percent in Q3 say they are pessimistic about the long-term future of the American economy. Two-thirds (67%) are very concerned about the nation’s debt (up from 61% in Q2), and half (48%) are very concerned about the strength of the dollar, up from 42 percent in Q2 2011. Concern about the level of unemployment also increased to 53%, compared to 44%in Q2.
“It seems clear from our survey that investors’ concerns have grown with respect to the national debt, the strength of the dollar, and the level of unemployment,” says Bill Cheney, chief economist for John Hancock. “However, other concerns have lessened, such as worries about oil and gas prices, unrest in the Middle East, and even inflation as fewer people predict inflation rates of four percent or higher. It is interesting to note, too, that despite these concerns, it is clear that people still understand the importance of investing and planning for retirement.”