Australian investors are growing increasingly bearish towards financial markets over the next 12 months as concerns grow over tensions between global economies, falling property prices and China's slowdown.
Investment Trends this week released its December 2018 Investor Intentions Index, a monthly study that tracks Australian investors’ market outlook and intended investments.
The study draws on monthly surveys participated in by 2,195 Australian investors over the last 12 months.
Australian retail investors ended 2018 with a bearish market outlook. As at December 2018, investors on average expect the All Ordinaries Index to grow by 0.3 per cent over the course of the next 12 months, excluding dividends.
Investment Trends research director Recep Peker said these expectations are well below what we saw at the end of 2017, where investors expected capital gains of 4.8 per cent for calendar year 2018.
“Q4 2018 stands out as investors’ most bearish quarter since the GFC, with the average investor closing the year expecting no capital gains from domestic shares in 2019,” Mr Peker said.
“Despite this, they still believe in the income potential of Aussie shares, expecting a yield of 4.1 per cent over the next 12 months.”
According to Mr Peker, investors’ return expectations were being dragged down by their mounting concerns with the current state of the world’s financial markets. On a scale of 0 to 10, where 10 is extremely concerned, the latest readings placed the average investor concern level at 6.6 – the highest level since February 2012.
When asked what they were most concerned about, tension between the world’s major economies was top of mind (cited by 55 per cent, up from 40 per cent in October), followed by the current White House administration (53 per cent, up from 46 per cent) and a slowdown in China’s economy (41 per cent, up from 32 per cent). From a domestic perspective, 30 per cent are worried about property prices, on par with concerns of share market volatility.
“The last few months has seen investors take an increasingly global perspective when considering what factors may affect their portfolios. Recent market falls have helped confirm their fears, dragging down the average investor’s outlook for 2019,” Mr Peker said.
“Where some are fearful, others see opportunity, with nearly a quarter expecting strong returns from domestic equities in 2019. Financial services firms and advisers can help retail investors better understand the current climate in order to make more informed decisions.”