Logical Caution
It’s a case of once burned, twice shy as investor confidence continues to slowly grow in the latest IFSA CoreData Investor Sentiment Index released this week.
Cautious optimism is logical considering the emotional and monetary scars from the recent global crisis – although for many, the bad experiences associated with these scars are fading as time passes.
A guarded positive outlook is both understandable and a desired outcome post-financial crisis, as investors cautiously move forward it is imperative that lessons are learnt and individuals consider the full scope of any investment decisions made.
Yet the financial services industry needs to be acutely aware though that while confidence has stabilised positively, it wouldn’t take much to send investors running for the hills again.
Having said that, investors it seems have stopped licking their wounds and are now looking to the future as we move through one-year-on since US bank, Lehman Brothers, collapsed and with it almost the whole global financial system.
Investor confidence has cemented itself in positive territory in Q3 quarter after creeping back into the black in Q2 for the first time since the financial crisis began in late 2007.
The Index, which stood at -22.3 in the first quarter of 2009, rose to +2.3 in the second quarter of the year and now stands at +5.0 in Q3 .
One key measure of the index relates to satisfaction levels with existing investments, which rose in light of the strong recent performance of the Australian share market. Satisfaction with existing investments increased from 7.8 in Q2 to 13.6 in Q3. (The scale is calculated by a weighted subtraction of positive responses from negative responses).
Another core measure of the investor confidence index is the outlook for investments over the coming three months, and this rose from -10.7 to +11.9 between Q2 and Q3.
Financial security levels also continue to creep up this year – increasing throughout the year from Q1 +6.3 to Q2 +7.1 and now Q3 +11.2.
Meanwhile satisfaction with current investments is also rising reassuringly as market volatility reduces and investors rebuild their faith and trust in the system post-financial crisis. Satisfaction with existing investments rose from Q1 -5.1 to Q2 +7.8 to Q3 +13.6.
Investors also appear more confident about the future strength of the Australian economy with corresponding optimism about their own financial security and the future outlook for business.
