CAQ Event : What is Driving Investor Confidence (6th Annual Main Street Investor Survey)
Today, the Center for Audit Quality (CAQ) released its sixth annual Main Street Investor Survey. Panelists at the event included: Douglas Elliott, Fellow of Economic Studies at the Brookings Institution; Cindy Fornelli, Executive Director, Center for Audit Quality; David Gardner, Motley Fool Co-founder and Chief Rule Breaker; Gail MarksJarvis, Syndicated Financial Columnist for the Chicago Tribune; and John Nofsinger, Finance Professor at Washington State University.
The survey polled individual investors with at least $10,000 in investments and found that roughly 65 percent of those investors expressed optimism in U.S. capital markets, marking the first increase in confidence since 2008. In addition, 37 percent of those respondents based their increase in confidence on information (news) and economic data. For those investors who expressed little or no market confidence, 37 percent of investors cited the economic crisis, the recession, and/or the overall state of the economy as the top reasons for their outlook. The study also found that confidence in U.S. companies and audited financial information “remained steady” at 71 percent and 69 percent, respectively.
On the other hand, confidence in capital markets outside the U.S. fell to 35 percent, down from 65 percent in 2007. When asked why investors felt little or no confidence, 52 percent said the debt crisis in Europe and the bad economic climate worldwide contributed to this lack of confidence.
Other key findings:
- 70 percent of investors said their investment behavior has not changed in the last six months given the current state of the economy.
- On economic issues affecting investment decisions:
- 30 percent of investors said the pending expiration of reduced tax rates on dividends and capital gains in 2013 will impact their decisions “a lot,” while 32 percent said it would have “a little” impact on their decisions.
- 33 percent of investors said the continued slow pace of economic recovery will impact their decisions “a lot,” while 40 percent said the pace would have “a little” impact on their decisions.
- 70 percent of respondents said they have “some, quite a bit, or a great deal of confidence” in independent auditors who audit publicly-traded companies. 66 percent of respondents said they had confidence in financial advisors and brokers. Only 39 percent of respondents expressed such confidence in government regulators.
- 39 percent of investors polled said they believe the U.S. economy will remain stable over the next 12 months, while 64 percent of investors said they expect their personal or family’s financial situation to stay the same.
- The biggest investor concerns were: 1) not having enough money for retirement (57 percent); 2) not being able to afford health care if the investor or a family member is seriously injured (56 percent); and 3) not being able to maintain the investor’s current standard of living (52 percent).
During the question and answer session, moderated by Politico’s Wall Street Correspondent Ben White, panelists mentioned how the Facebook IPO issues undermined investor confidence. Gardner said “it’s a shame that Facebook was the poster child of investing,” adding that it is “unfortunate that so many people used this as a proxy in determining whether the stock market was worthy…. Facebook should not be a measure of investment worthiness in the U.S. market.”
On the European outlook, Elliott said he believes there is a 25 percent chance “of a real disaster in Europe.”
On the fiscal cliff, Elliott said a deal will have to be struck that cuts spending and raises revenue. Notably, Elliott said he was leaning more towards the “extreme view” that in order to spur any serious action, the U.S. will have to fall off the cliff. He said, “I do believe this is a serious possibility.”
On the banking sector, MarksJarvis said people have lost confidence in the banking sector and that individuals and institutions “have not come back because they call the banks ‘black boxes.’ They cannot see inside despite the audits and information available to us. People are afraid that they can’t analyze them.”
On market structure, Gardner said it is “still possible” for investors to hold stocks for 3-5 years, “despite the rise in high frequency trading.” Gardner said he had “mixed feelings” on high frequency trading, but added that it does increase liquidity in the worlds markets. Gardner and Elliott went on to discuss how Wall Street is currently distracted by shorter-term issues and that it is a smart decision for investors to play the long-term game.
For more information on the event, please click here.
2012 Main Street Investor Survey
Today, the Center for Audit Quality (CAQ) released its sixth annual Main Street Investor Survey. Panelists at the event included: Douglas Elliott, Fellow of Economic Studies at the Brookings Institution; Cindy Fornelli, Executive Director, Center for Audit Quality; David Gardner, Motley Fool Co-founder and Chief Rule Breaker; Gail MarksJarvis, Syndicated Financial Columnist for the Chicago Tribune; and John Nofsinger, Finance Professor at Washington State University.
The survey polled individual investors with at least $10,000 in investments and found that roughly 65 percent of those investors expressed optimism in U.S. capital markets, marking the first increase in confidence since 2008. In addition, 37 percent of those respondents based their increase in confidence on information (news) and economic data. For those investors who expressed little or no market confidence, 37 percent of investors cited the economic crisis, the recession, and/or the overall state of the economy as the top reasons for their outlook. The study also found that confidence in U.S. companies and audited financial information “remained steady” at 71 percent and 69 percent, respectively.
On the other hand, confidence in capital markets outside the U.S. fell to 35 percent, down from 65 percent in 2007. When asked why investors felt little or no confidence, 52 percent said the debt crisis in Europe and the bad economic climate worldwide contributed to this lack of confidence.
Other key findings:
- 70 percent of investors said their investment behavior has not changed in the last six months given the current state of the economy.
- On economic issues affecting investment decisions:
- 30 percent of investors said the pending expiration of reduced tax rates on dividends and capital gains in 2013 will impact their decisions “a lot,” while 32 percent said it would have “a little” impact on their decisions.
- 33 percent of investors said the continued slow pace of economic recovery will impact their decisions “a lot,” while 40 percent said the pace would have “a little” impact on their decisions.
- 70 percent of respondents said they have “some, quite a bit, or a great deal of confidence” in independent auditors who audit publicly-traded companies. 66 percent of respondents said they had confidence in financial advisors and brokers. Only 39 percent of respondents expressed such confidence in government regulators.
- 39 percent of investors polled said they believe the U.S. economy will remain stable over the next 12 months, while 64 percent of investors said they expect their personal or family’s financial situation to stay the same.
- The biggest investor concerns were: 1) not having enough money for retirement (57 percent); 2) not being able to afford health care if the investor or a family member is seriously injured (56 percent); and 3) not being able to maintain the investor’s current standard of living (52 percent).
During the question and answer session, moderated by Politico’s Wall Street Correspondent Ben White, panelists mentioned how the Facebook IPO issues undermined investor confidence. Gardner said “it’s a shame that Facebook was the poster child of investing,” adding that it is “unfortunate that so many people used this as a proxy in determining whether the stock market was worthy…. Facebook should not be a measure of investment worthiness in the U.S. market.”
On the European outlook, Elliott said he believes there is a 25 percent chance “of a real disaster in Europe.”
On the fiscal cliff, Elliott said a deal will have to be struck that cuts spending and raises revenue. Notably, Elliott said he was leaning more towards the “extreme view” that in order to spur any serious action, the U.S. will have to fall off the cliff. He said, “I do believe this is a serious possibility.”
On the banking sector, MarksJarvis said people have lost confidence in the banking sector and that individuals and institutions “have not come back because they call the banks ‘black boxes.’ They cannot see inside despite the audits and information available to us. People are afraid that they can’t analyze them.”
On market structure, Gardner said it is “still possible” for investors to hold stocks for 3-5 years, “despite the rise in high frequency trading.” Gardner said he had “mixed feelings” on high frequency trading, but added that it does increase liquidity in the worlds markets. Gardner and Elliott went on to discuss how Wall Street is currently distracted by shorter-term issues and that it is a smart decision for investors to play the long-term game.
For more information on the event, please click here.
2012 Main Street Investor Survey