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Financial Planning > College Planning

Investor Optimism on Economy, Stock Market Grows in Q1: E-Trade

By Jeff Berman

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Investors are increasingly upbeat about the U.S. economy and stock market, according to the findings of the latest E-Trade Financial StreetWise quarterly tracking survey of experienced investors.

When it comes to the current market, 61% of those surveyed for the first-quarter report said they were bullish, up from 50% in the Q4 report and only 46% in the Q1 report last year, E-Trade said.

Meanwhile, 56% of the 909 self-directed active investors managing at least $10,000 in an online brokerage account who were surveyed online Jan. 2-10 said they believed the stock market would rise by the end of Q1, while only 24% said they thought it would drop, according to E-Trade.

Nearly half (49%) of investors surveyed this time gave the economy a “B” rating, up from 42% in Q4. In comparison, 23% gave it an “A” (up from 16%), 22% gave it a “C” (down from 32%), 4% gave it a “D” (down from 8%) and 2% again flunked it entirely with an “F.”

Almost half of the investors surveyed (46%) said they expected the Federal Reserve to keep rates the same this year, up from 40% in Q4. In comparison, 9% predicted the Fed will raise rates twice (up from 0% in Q4), 29% predicted the Fed will raise rates once (up from 12%), 8% predicted the Fed will cut rates once (down from 35%), 1% predicted the Fed will cut rates twice (down from 4%) and 7% said they didn’t know (down from 8%), E-Trade said.

While interest in stocks remains high, interest in exchange-traded funds is growing, with 41% of the investors surveyed this time expressing interest in them, up from 33% in Q4 and only 30% in Q1 last year. At the same time, interest in large- and mid-caps increased since Q4, the company said.

Family Investment Trends

E-Trade also this time examined how those investors surveyed who are parents handle their financial decisions, and there were both positive and negative signs in the responses.

One of the positives: Three out of four parents think their partner is helpful in financial decision-making (75%), compared with 73% of the total population. Similarly, three out of four parents said they felt comfortable with their partners executing on investment decisions without their input (75%), compared to 67% of the total population.

“But they can go rogue when it’s time for an investment decision,” E-Trade noted, pointing out that 42% of parents surveyed said they often made money moves without informing their partners, compared with 34% of the total population.

Meanwhile, 39% of parents said they frequently felt guilty about making an investment decision without telling their partners, compared with 26% of the total population.

“Children create a completely new set of financial obligations for couples, and it’s encouraging to see these complex decisions being made in stride,” according to Mike Loewengart, vice president of investment Strategy at E-Trade Financial. “With the mounting demands put on parents today, collaborating with their partner on financial decisions is critical to creating a financial strategy that works for their family, and potentially the opportunity to pass those habits down to the next generation,” he said in a statement.

“When it comes to family financial planning, parents should examine their entire financial picture — from investments and college savings plans to mortgages and emergency funds,” he went on to say, adding it is important to “understand your time horizon, risk tolerance, and financial goals to help plot a roadmap for the future.”

Use an Advisor and Other Tips

Loewengart provided additional steps that parents may consider in planning for their family’s future: First, “surprise expenses abound,” so it’s best to “plan ahead” and “build an emergency fund by saving a little each week — three to six months of living expenses is a good goal” — and then not touch those funds. Second, it is a good idea to start saving for education now because the cost has “skyrocketed in the last few decades, and with history as our guide tuition will likely only continue to rise.”

Parents should also “consider working with a professional,” he said. “While there are many digital tools and self-help resources out there, sometimes it can be too much to manage your household’s finances on your own,” he noted, adding: “Given the complex financial needs of families, consider speaking with a certified financial planner or investment advisor to map out your investment goals and discuss strategies to help meet them.”

He provided one additional tip: “Retirement saving should remain a core part of your investing plan, but don’t underestimate the importance of designating a beneficiary for this account. Big life events, like having children, may affect your beneficiary choices, and updating a beneficiary is quick and easy. In fact, beneficiary designations are often included in the account opening process. Review your beneficiaries at least annually to make sure they’re consistent with your intentions.”

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Jeff Berman

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