Moody Clients

Investment markets, much like any other living, breathing organism are prone to mood swings.

These mood swings can be both mild and devastating; with the change often occurring faster than you can coin the phrase Global Financial Crisis.

At times the market is deliriously positive – an unrealistic self confidence that drives values to new heights and often has investors similarly drugged on euphoria and wealth.

But markets going through a bout of depression and negativity can be stuck in a rut that is difficult to break. Each new piece of news, regardless of how irrelevant it may be to the larger picture, plunges indexes to new lows and leaves economists scratching their heads.

Over the past four years we have seen both ends of the spectrum of market mood shifts.

From the deliriously euphoric during the 2003 to 2007 bull run to the subsequent come down of 2008.

But what about the period in the middle?

There is a Youtube clip that is doing the rounds of a baby that is caught between complete horror and uncontrollable laughter each time his mother blows her nose, reminiscent of investment markets over recent years.

Following the GFC the volatility in the markets was huge. Every positive piece of new information saw the market jump considerably but, much like the baby in this clip, the mood quickly reverted to horror upon receiving negative news.

For the average financial adviser, knowing the mood of the market is as important as knowing the mood of their clients.

CoreData publishes a quarterly ‘Investment Sentiment Index’ (ISI) that aims to capture the mood of investors and their future market intention and the latest index shows high net worth investors think the time to jump back in is drawing near.

Australia’s cash savings are at all-time highs, the ASX is grinding along tentatively and our latest research tells us that while most investors are happy to sit on the sidelines for the moment, experienced investors – those with stronger investment experience and higher value portfolios – have itchier feet.

The ISI has proven to be an accurate thermometer of retail investor sentiment and enables planners to gain a deeper understanding of how their clients perceive both the various asset classes and economic and business conditions.

The index tracks investor sentiment and predicts future cash flows to and from investments as well as monitoring which asset classes the average investor predicts will outperform.

The CoreData Investor Sentiment Index for Quarter 1 2011 will be available in early April. For more information contact CoreData on 02 9376 9600