Investor return expectations finally leap through the fear barrier

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Falls in investor fear throughout 2012 were not translating into higher return expectations and the intention to invest until now, according to new research by Investment Trends.

The January 2013 Investor Intentions Index, released last week, is a monthly report that takes the pulse of Australian investors’ sentiment and investment intentions, and is based on the responses of over 800 investors per month.

Australian investors’ concern level (with the situation in the financial markets) has fallen to a 40 month low. Investors’ fear levels have been dropping steadily since late 2011, when they at levels last seen during the depths of the financial crisis.

“Up until the end of 2012, this decline in fear levels had not translated to an increase in investors’ 12 month market return expectations, which have been hovering around the 3% to 4% mark (excluding dividends) since the beginning of 2012,” said Investment Trends Senior Analyst Recep Peker. “Now, for the first time, we have seen a big spike in investors’ market return expectations.”

In January, the average investor was expecting the Australian stock market to rise by 7% (excluding dividends), jumping up from 5% in December. This corresponds to a rapid improvement in the stock market.

“Return expectations don’t predict returns, but they do predict investment activity, therefore this is a huge development,” said Peker. “January is the most positive we have seen investor return expectations in the last 20 months.”

“Half (49%) of investors say they plan to increase their exposure to Australian shares in the next month, up from 37% in December 2012,” said Peker. “There is a significant jump in the appetite for direct shares, and for the first time since the inception of this study there are more investors who intend to reduce their exposure to term deposits than increase their exposure.”

Australian sharemarket expectations

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