Downturn not deterring investors yet

downturn investors

Retail investors have chosen to ride out the recent market downturn, but remain less than optimistic about long-term growth and government debt.

Australian retail investors are holding on to their investments despite the recent COVID-19-related market downturn, but a large majority still believe the market has yet to hit its lowest point, according to a research firm.

Investment Trends reported that as part of on an ongoing research project, running since 2011, which tracked investors’ concerns over investment markets, and their intentions regarding their investments, the level of concern had declined from an historical high in the past few weeks.

The firm said its data has shown levels of concern for the state of the world’s investment markets peaked three weeks ago at 7.7 out of 10, but retreated to 7.2 as of 7 April, despite ongoing changes in markets due to the global pandemic.

Investment Trends chief executive Mike Blomfield said Australian retail investors had been mainly concerned with a slowdown in China, but this focus has moved to a higher level of concern about the United States and Australian economies and the level of debt in Australia.

Blomfield said despite these areas of concern, retail investors are still expecting growth in the longer term, adding the “average return expectations for the All Ords for the 12 months ahead has returned to positive territory in recent days, and now sits at 1.5 per cent, excluding dividends”.

“Along with these muted return expectations, the dividend yield that retail investors expect to receive has fallen to 3 per cent from what had been an incredibly persistent 4 per cent over the past years,” he said.

Investment Trends pointed out that despite these low expectations, investors were staying in the market and in the two-week period until 3 April most investors involved in the research project indicated they had either sat out the volatility in the market or bought shares in an attempt to lower their cost base.

“Perhaps even more importantly in the fortnight ahead, 26 per cent of retail investors intend to increase their exposure to Aussie equities, while 12 per cent intend to reduce their exposure. On a net basis, retail investors remain buyers of the market, even with the volatility we’ve seen,” Blomfield said.

“However, there is a long road ahead. Fully 80 per cent of retail investors believe the market has not yet reached its bottom, and this percentage has persisted for the last three weeks.”

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