“After a long period of growth, financial advisors and investors need to get used to an ongoing environment of uncertainty,” Kristina Hooper, Invesco’s global chief market strategist, said Monday on the release of the firm’s latest investor and advisor pulse study.
The survey, conducted in January and again in April, found that after February’s market downturn, 57% of investors expected a disruption to occur this year, compared with 49% who had this expectation in January.
The number of investors who perceived a bull market plummeted to 37% after the correction, down 28 percentage points from January.
At the same time, advisors’ perception of a bull market fell off only 12 points from January, to 61%.
Following the downturn, 69% of investors said it was a good time to invest, down from 80% in January, while advisors’ view remained unchanged from January at 87%.
“This research demonstrates that investors are confused and overwhelmed, causing them to react emotionally,” Hooper said. “Now more than ever, advisors need to educate and support their clients to help them reach their individual investment goals.”
GfK conducted online surveys in January and April: first, of 1,015 investors who use a financial advisor and have at least $100,000 in investable income and 811 financial advisors; then in April, of 500 investors and 403 advisors.
According to the results, investor worries were focused on Congress and the federal budget deficit, while advisors’ chief concerns were rising interest rates and rising inflation.
Both investors and advisors agreed that a trade war was the main risk factor that could lead to a downturn this year. This sentiment echoed that of global fund managers polled in June.
In addition, neither group in the Invesco study saw a recession in the next 12 months, though they expected one by 2021.
Both sets of respondents saw two to three more market adjustments this year, but said the market would have to fall by more than 20% to be considered a true disruption.
Volatility’s Effect on Expectations
The survey showed that market volatility had affected investors’ expectations of the market for the next 12 months.
They remain committed to their investing strategies, but have become more pessimistic about the U.S. and global economies and about their own personal financial situation.
In the April survey, 27% of investors expected the global economy to be worse in the next 12 months, compared with only 17% in January; likewise their outlook on the U.S. economy, 27% versus 21% in January.
Investors’ pessimism about their personal financial situation doubled from 4% in January to 8% in April.
Despite investor concerns, advisors maintained their confidence in the market and the global economy. The vast majority of advisor said the investment climate was good.
Half of the advisors in the April poll still agreed that both the U.S. and global economies would be better in 12 months, but were aware that their clients had become more cautious in the face recent market volatility.
Invesco said both investors and advisors were preparing for more market volatility. More than half of investors surveyed said their advisors had contacted them during the February volatility, but one-quarter said they were disappointed not to have heard from their advisors.
Nevertheless, most investors said they would continue to rely on their advisors for guidance and would work with them to strategize against future volatility and possible market downturns.
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