Investment Trends, an online trading industry research firm, has unveiled its latest survey, the October 2018 Investor Intentions Index. According to the forward-looking report, Australian share market return expectations have turned negative for the first time since the Global Financial Crisis (GFC).
The investor intentions index is a monthly report that tracks market outlook and intended investments. In October, the return expectations of Australian retail investors dropped sharply during the month.
In line with market performance, retail investors in Australia are now expecting a negative return in their investments. This is the first time return expectations have fallen below zero in the country since Investment Trends began tracking sentiment in 2009.
Specifically, in October, the average capital gain expectations on the Australian stock market (excluding dividends) fell to -1 percent. This is a sharp drop from September, which had a sentiment of +1.2 percent and even further down from January, where sentiment was +4.7 percent.
Commenting on the results, Recep Peker, Research Director at Investment Trends said: “Investors now believe we’re in a bear market, on average expecting domestic markets will be lower in 12 months’ time than where they are today. While recent volatility has played a hand in driving this pessimism, investors are more concerned about major global issues.”
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Australian Investors Aren’t Overly Concerned with Market Volatility
During 2017 Aussie investors were becoming less and less sensitive to market volatility and global events. This is evident when retail investors were asked to rate their level of concern with the world’s financial markets in February 2018, which was the least concerned since the GFC.
Now, however, it seems that has changed, and Australian retail investors aren’t quite so relaxed. In October, concern levels reached a 22 month high. However, volatility it only the sixth-most cited reason for this level of concern, coming in at 27 percent.
Instead, it’s geopolitical events that are casting the biggest shadow. In Australia, retail investors are most worried about the current White House administration (46 percent), coming in second is tension between the world’s major economies (40 percent), followed by global debt levels (33 per cent) and something that always has a large impact on the Aussie economy – a China slowdown (32 percent).
Speaking of the concerns, Peker added: “whether directly or indirectly, Australians are concerned about the economic outcomes of the current White House administration and the trade policies being implemented both by the US and in response to them.”
“With capital gain expectations for the Australian stock market turning negative at the same time that the local property market has cooled, financial services firms of all kinds will need to work hard to convince Australians to stay invested through the current cycle.”