Plunging consumer confidence is challenging financial planners with research finding that investors are now less confident about investment markets than they were during the global financial crisis (GFC).
CoreData’s latest Investor Sentiment Index, published quarterly, has revealed confidence has fallen to its lowest point in seven years, and is now at the lowest level seen in the short history of the index, which was established in early 2005.
The researcher’s Investor Sentiment Report for Q4 2011 revealed a confidence rating of -22.4 – slightly lower than in Q1 2009, when confidence sat at -22.3.
The Investor Sentiment Index is an aggregate measure of Australian investor sentiment across expectations regarding the performance of the economy and markets, perceptions of individual financial situations and future investment intentions.
This quarter marks the seventh consecutive quarter where the index has been negative, highlighting the prolonged effect of the GFC on Australian investor confidence, and their lack of confidence in the current global economic situation.
The research found local investors are largely pessimistic about the prospects for economic growth, with the majority believing that the economy is going to slow down over the next quarter (65 per cent).
This view is consistent across all demographics surveyed.
The report also revealed two in five Australian households are financially worse off than they were 12 months ago.
Western Australians households are the least likely to be feeling the pinch, with 53 per cent of households saving, compared to only 39 per cent of Victorian and South Australian households.
“Investor confidence has hit its lowest point in the seven years we have been tracking it, demonstrating just how much uncertainty there is among investors about what the future might hold,” says Kristen Turnbull, head of advice, wealth and super at CoreData.
“The negative sentiment can be attributed to pessimism about growth prospects for the Australian economy, the current financial situation of households and low investment intention this quarter.
“On a positive note, sentiment towards business conditions has improved slightly quarter-on-quarter and we’re seeing greater optimism that household financial positions will improve in the next 12 months.”
Other key findings detailed in the report are:
- One in three respondents is not making ends meet (31 per cent), on par with Q3 while 14.1 per cent are having to draw on savings and 10.3 per cent are running into debt;
- For the first time since Q1 2009, there are more investors who think that cash will perform worse for investors than those who think it will perform better (29.1 per cent versus 25.2 per cent); but
- Despite this, cash still remains the most popular asset class for investors to rebalance to, with more than one in four (27 per cent) investors looking to rebalance to cash this quarter.
