No Silver Lining… Yet

Negative investor sentiment is gaining momentum, according to the March 2009 CoreData Investor Sentiment Index.

Pessimists outrank optimists by seven to one for the performance of market investments in the forthcoming second quarter of 2009, with more than two in three (68.8 per cent) of investors believing the market will be somewhat worse or much worse.

Only 10.2 per cent are anticipating, or realistically holding out hope, that the market will be somewhat better or much better.

One in five respondents (21 per cent) are sitting on the fence, with a view investment product performance will remain relatively unchanged.

A bright spot in the investment gloom is that a third of respondents (31.8 per cent) are likely to put more money into existing assets, potentially averaging down the entry price on investments purchased before the global financial downturn.

Investment product prices are nearing a buy-in point, according to a fifth of respondents (18.7 per cent), who are likely to take out new investments in the next quarter.

The flipside is 63.8 per cent are very unlikely to take out a new investment, with 8.0 per cent somewhat unlikely.

International equities recorded the highest potential investor desertion, with 47.7 per cent looking to lighten exposure, along with 42.6 per cent of property investors.

There will be a small exodus experienced from the more stable bond market, with 29.2 per cent looking to reduce exposure, with just 28.2 per cent thinking its time to decrease cash holdings.

Investors though are sitting on their hands when it comes to Australian equities, with only 22.2 per cent of respondents likely to reduce their portfolio weighting in the second quarter of 2009.

Security of funds will be the main driver for altering investors portfolio composition, with over one third (35.2 per cent) more likely to increase the cash portion of their portfolios during the second quarter, despite falling returns due to the reduction in interest rates by the Reserve Bank of Australia.

With regards to the Australian economy, on one hand the good news is sentiment remained stable with the previous quarter’s analysis, but alarmingly this was at the lowest point recorded since the inception of the Investor Sentiment Index, in 2004.

Respondents included in the Investor Sentiment Index must have a minimum $10,000 investment portfolio, excluding superannuation, with 720 investors contributing to the survey results between February 26 and March 3 2009.