Australian retail investors remain resilient in the face of enormous volatility

From

Mike Blomfield

Leading research firm Investment Trends provides a brief on the latest views of Australia’s retail investors in the midst of the COVID-19 pandemic and market volatility.

Key highlights

  • Australian retail investors remain resilient in the face of enormous volatility
  • Return and dividend expectations have fallen sharply, but remain in the black
  • Retail believe the market has further to fall before it recovers

Commentary

An ongoing research study by leading Australian research firm Investment Trends suggests Australian retail investors remain committed to holding their Aussie equities for the long term despite very high levels of concern for the world’s markets.

Current data shows that the levels of concern Australians have for the state of the world’s investment markets peaked three weeks ago at 7.7 out of ten – higher than the post-GFC high of 7.4 in December 2011 – but have retreated to 7.2 as of today. At the same time, the issues that most concern them have evolved as the global pandemic has played out.

Investment Trends CEO, Mike Blomfield, explains “As recently as a month ago, Australian retail investors were primarily concerned with a slow-down in China, but as the days and weeks have flown by this concern has shifted to an intense level of concern about the US and Australian economies and the level of debt in Australia. Aussies are worried about the underlying economy more than they are about volatility and near-term returns.”

Despite these elevated concern levels, Australian investors still see growth on the horizon. Blomfield says, “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%, excluding dividends.”

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

But Australian retail investors aren’t fleeing the market. In the fortnight to last Friday, 3 April, the vast majority of investors said they had either sat out of the market’s volatility or bought shares in an attempt to lower their cost base. “Perhaps even more importantly”, Blomfield added, “in the fortnight ahead, 26% of retail investors intend to increase their exposure to Aussie equities while 12% intend to reduce their exposure. On a net basis, retail remain buyers of the market, even with the volatility we’ve seen.”

“However, there is a long road ahead. Fully 80% of retail investors believe the market has not yet reached its bottom, and this percentage has persisted for the last three weeks”, says Blomfield. Investment Trends will continue to monitor retail investors and their views in the weeks and months ahead.

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