Young Australian investors upbeat about their financial prospects

From

Anna Paglia

State Street Global Advisors, the asset management business of State Street Corporation (NYSE: STT), today released the results of its 2024 ETF Impact Survey, which found that despite the domestic cost-of-living crisis, Australians are amongst the most optimistic in the world regarding their own financial position.

However, that positivity falls dramatically when the Australian economy, the US outlook and the global context are included.

Eighty-one per cent of Australian individual investors are confident about their personal financial positions, marginally behind the US on 84%, and ahead of Singapore with 79% and Japan with 70%.

But this falls to 30% for Australians who feel the same way about the domestic economy, and only 19% when the global outlook is considered.

The survey examined both individual and institutional investor sentiment towards the US$12.89 trillion1 exchange traded products (ETPs) market, and the broader global economy.

More than 2 million Australian investors[2] now hold $193 billion in ASX-listed ETPs, up from about $10 billion a decade ago[3]. Globally, more than 12,000 ETP products are now available across 80 exchanges in 63 countries[1].

State Street Global Advisors’ Head of Investments, Australia Jonathan Shead said continued geopolitical uncertainty created by conflicts in Ukraine, the Middle East and growing tensions between the United States and China in the South China Sea were impacting individual and institutional investors in different ways.

“Younger Australian investors in their 20s and 30s are the most optimistic generation about their own finances, while middle aged Australians in their 40s and 50s are the most pessimistic” he said.

“This suggests cost-of-living pressures are being most heavily felt by Generation X who may have dependent children, large family mortgages and simultaneous caring responsibilities for their elderly parents.   

“Almost two thirds of individual Australian investors were worried about geopolitical tensions sweeping the world, compared to only a third of institutional investors. 

“The relative comfort institutional investors may have about global instability may explain why 50% of Australian institutions are bullish about the domestic economy and the international outlook,” he said.

“For this reason, almost 80% of Australian institutional investors now include domestic and international exchange traded funds (ETFs) extensively or frequently within their portfolio.”

Eight countries were surveyed across North America, Europe and Asia, including Australia, the United States, the United Kingdom, the Netherlands, Sweden, Switzerland, Singapore and Japan.

Key findings

Global comparison

  • Australian individual investors remain remarkably confident, compared to those overseas, about a range of potential economic shocks in 2024 including election outcomes, recession risks, geopolitical tensions, interest rate increases and rising unemployment.
  • In comparison, more than three quarters of Americans are concerned about the impact of the US Presidential election in November, that is likely to offer voters a choice between incumbent President Joe Biden and former President Donald Trump.
  • In contrast, only 56% of Australians are concerned about an election here, which must be held between now and 27 September 2025.

Age

  • On a generational basis, Millennials (aged 28-43) are the most optimistic age group about their country’s economic outlook (38%), compared to retirement-age Baby Boomers (aged 60-78) on 31% and Generation X (aged 44-59), who are the most pessimistic at 22%.
  • However, this sentiment deteriorates rapidly when considering the Australian economy and the global outlook.
  • Only 30% of Australians are confident about our national economy, and this falls to 19% when the global outlook is considered.
  • Baby Boomers are most pessimistic about the international outlook, with just 14% having a positive view of the global economy, suggesting older Australians may take defensive positions within their investment asset allocation this year.

Institutional investors

  • In comparison, 58% of Australian institutional investors are optimistic about the Australian economy, which falls to 56% for the global outlook and only 52% for the US economy.
  • 50% of Australian institutional investors are bullish about S&P500 returns to the end of 2024, surpassed only by those in the Netherlands and the US (57%).

The least bullish are Singaporean institutional investors at 36%.

  • Australian institutional investors are the second most likely in the world, at 78%, to use ETFs in their firm’s portfolio extensively or frequently, trailing only Japan (82%), but ahead of the Netherlands (71%), Switzerland (67%), Singapore (66%), and the United Kingdom at 64%.
  • US investors are least likely to use ETFs, although a clear majority do so (61%).

State Street Global Advisors Global Chief Business Officer, Anna Paglia, said there was growing confidence that ETFs should be a core part of a diversified portfolio. “The rapid growth and lower cost of ETFs since their introduction over 30 years ago has made it easier for people from all walks of life to become investors,” she said.

“However, despite their popularity, significant investor education still needs to be done to close the knowledge gap about ETFs.

“With so many ETFs in the market, it’s understandable how difficult it can be for investors to choose funds that fit their goals and objectives.”

Mr Shead said the appeal of ETFs differed markedly around the world. “Performance and reputation are the two most important criteria that Australian institutional investors use when choosing between ETFs,” he said.

“In comparison, Swiss, Dutch and Japanese investors focus on cost, while US, UK, Swedish and Singaporean investors favour liquidity.

“Globally, institutions are leaning towards maintaining their allocations in bonds and cash, while they are split on whether to increase or maintain current allocations in equities and alternative investments.

“For this reason, 80% of institutions are likely to consider actively managed ETFs in 2024, while only 4% have ruled them out.”

Last year State Street Global Advisors marked the 30th anniversary of the first ever US-listed ETF. Launched on January 22, 1993, on the New York Stock Exchange (NYSE), the SPDR S&P 500 ETF Trust was later listed on the ASX on October 13, 2014 (represented by CHESS Depository Interests), providing Australian investors with access to the world’s largest economy.

State Street Global Advisors initially brought ETFs to Australia in 2001, with the launch of Australia’s first ETFs, the SPDR® S&P®/ASX 200 Fund (STW) and the SPDR® S&P®/ASX 50 Fund (SFY).

Individual Investor

 

 

Institutional Investors

Survey Methodology

State Street Global Advisors’ Research Center, in partnership with A2Bplanning and Prodege, conducted an online survey among individual investors, financial advisors, and institutional investors. Data was collected from April 1-25, 2024 with the following respondent criteria: 

Individual Investors:

  • In the US:  a nationally representative sample of 1,000 adults 18+, and then filtered for analysis among 319 Individual Investors with investable assets (IA) of $250K or more.
  • In Australia, Singapore, and Japan: representative sample of 260, 254, and 220 Individual Investors, respectively, with IA equivalent of $250K or more.

Institutional Investors:

Global representative sample of Institutional Investors who are involved in the decision making for an AUM of $1B or more from the US (100), the UK (100), Netherlands (100), Sweden (75), Switzerland (51), Australia (50), Singapore (50), and Japan (50).

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Notes:
[1] Source: ETFGI Global ETFs Industry Insights Report, May 2024
[2]
Source: 2023 Investment Trends ETF Report, December 2023
[3]
Source: State Street Global Advisors and ASX Investment Products Monthly Report, May 2023.

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