Investors are feeling far more confident about the market than they did a year ago - but less confident than they were before the summer, according to the latest findings from the Investment Management Association. The findings come from research conducted amongst 3,451 small retail investors in the UK.
The numbers planning to invest have practically halved since May 2009, when the last survey was done, from just under 1 in 3 (30 per cent) to 1 in 6 (17 per cent). The biggest change has been amongst the wealthiest investors - back in May 44 per cent planned to invest, whereas now this has fallen to 27 per cent.
The IMA's latest Investor Confidence Index shows that investors are less bullish about the outlook for investment returns than they were six months ago.
The Investor Confidence Index stands at 99 – down 7 points on the high of 106 in May 2009 but significantly ahead (+28 points) of the position a year ago when the Index registered a low of 71.
The biggest decline was seen amongst the wealthiest investors. (A score of 100 is neutral, so a score of 99 shows a slight lack of confidence.) May 2009 was a high water mark for investor confidence.
Not only has confidence slipped, but investors intend to be less active in the market in the coming six months than they have been over the last half year. The IMA's Investor Intentions Index has fallen back to 91 from a high of 99 six months ago, showing that investors plan to invest at a lower level in the next six months. (A score of 100 is neutral, so a score of 91 shows some lack of enthusiasm.)
The main reason given for not investing, unsurprisingly, is that people don't have sufficient spare cash (59 per cent), whilst 30 per cent say that any spare cash is going into savings rather than investments. These reasons come well ahead of concerns about the market, with some saying they don't think now is a good time to invest because the market is too volatile (18 per cent) or that they think it will fall (9 per cent).
“With the worst of the financial crisis over, and with a broad range of asset prices having recovered from their lows, investors are far more confident at the end of 2009 than they were a year ago,” said Richard Saunders, Chief Executive of the IMA.
“In fact, 2009 is on course to see record inflows of retail funds into investment funds as investors have bought heavily into the rebound in asset prices.
“However, the strength of the rally in the stock market since the March low and its recent pause for breath as well as uncertainty about the prospects for the economy, have served to dampen expectations of further strong investment returns. As a result, investors are looking more cautious about the coming six months."
