In November, FTSE Russell asked more than U.S. 1,000 retail investors for their views on a wide range of topics from passive investing and asset allocation to working with financial advisors. The complete findings will be released in a comprehensive report in early 2023, but as a preview, FTSE Russell released timely findings on investors’ outlook for the New Year.
While recession fears, volatility and inflation topped investors’ list of concerns, these findings belie more complex and nuanced views on the economy, risk and investing. Although some data suggests retail investors may hold a somewhat gloomy economic outlook, the majority of investors are generally satisfied with the performance of their portfolios and should major markets decline, most would hold their course or view that scenario as a buying opportunity.
Concerns for 2023
When asked for their biggest concerns about investing in 2023, investors’ top concern is the “Impact of recession,” cited by 62% of respondents, followed by “Increased Stock Market Volatility” (49%) and “Confidence in the Fed’s Ability to Manage Inflation” (41%).
Biggest Concerns About Investing in 2023
Source: FTSE Russell Retail Investor Pulse Survey
In addition, 73% believe there will be a recession in 2023 with most retail investors feeling it will last at least nine months, 28% expecting 12-18 months and 16% anticipating more than 18 months.
Surprisingly Satisfied with 2022
Given their top concerns, one might expect investors to express dissatisfaction with their investment performance in 2022 – but that was not the case. While the findings don’t overwhelmingly support a single view, 58% were either “Very Satisfied” or “Somewhat Satisfied” with their portfolio performance with 19% “Neither” and 23% either “Somewhat Dissatisfied” or “Very Dissatisfied.”
Satisfaction with Investment Portfolio Performance Over P12M
Source: FTSE Russell Retail Investor Pulse Survey
Market Outlook
On the stock markets, 46% believe the markets won’t return to previous highs until 2024 or later, but views overall were mixed with 28% expecting hitting previous highs by mid-2023 or sooner.
When Will Stock Market Return to Previous Highs?
Source: FTSE Russell Retail Investor Pulse Survey
Mixed Views on Navigating 2023
This mixed sentiment may explain the split views of how to navigate 2023. Investors areas likely to take chances for larger gains in 2023 as they are to avoid investment risk. When asked if they will take a “Risk On” or “Risk Off” approach next year, investors were evenly split at 37% with 26% “Not Sure.” Unsurprisingly, younger investors were more willing to take on risk.
However, when asked about their likely action if the major stock markets should decline in 2023, 40% said they would maintain their current portfolio and 35% see it as a buying opportunity. Only 13% said they would move to a more conservative portfolio.
Similarly, when asked how they would invest $100,000 of new money, 36% chose “Equities” followed 25% choosing “Cash,” perhaps underscoring mixed views on risk for next year.
These seemingly contradictory findings may actually be the point and be a signal to financial advisors that investors are seeking guidance. While some investors are demonstrating real discipline and patience, still more than a quarter of investors uncertain about next year. Advisors should recognize this as an opportunity to demonstrate their value by engaging with investors to help them find a confident path for the future.
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