Overall investor optimism stable but retirees less rosy
ST. LOUIS–(BUSINESS WIRE)– Investors believe that more market volatility could lie ahead, with a majority saying they expect the market to be volatile in the New Year, according to the latest Wells Fargo/Gallup Investor and Retirement Optimism Index survey. Three-quarters of investors see market turbulence ahead, including 16% who say it will be “highly volatile.” Of those who anticipate market volatility, six in 10 (59%) investors are taking action to prepare by: consulting with a financial advisor (44%), purchasing stocks to take advantage of lower prices (30%) and selling stocks to protect from further losses (15%). The survey of 1,018 U.S. investors was conducted October 30-November 8.
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“The markets could be in for a bumpy ride, which is why it’s as important as ever for investors to have a strong financial plan that keeps them on track with their goals and risk tolerance,” said Zar Toolan, director of advice quality for Wells Fargo Advisors.
Investor Optimism Index Stable in Fourth Quarter
The Wells Fargo/Gallup Investor and Retirement Optimism Index held its ground in the fourth quarter, at +59, similar to +58 in the third quarter. Optimism has been slightly weaker in the past two quarters compared to the first half of the year when the index hovered near +70, but it is still higher than the +48 recorded a year ago.
Despite overall stability in the index this quarter, retiree optimism dropped 23 points to +47, driven by a loss of confidence in retirees’ attaining their five-year investment goals and reduced confidence in economic growth and inflation. At the same time, non-retiree optimism rose 10 points to +63 due to improved confidence around employment. This marks the first time in over a year that non-retired investors are significantly more optimistic about the investment climate than retirees.
“During times of uncertainty, investors’ attitudes and goals can change as quickly as their portfolios. This downward shift in retiree optimism highlights their concerns about reaching their near-term financial goals,” Toolan said.
Investors Say “Wait” on Raising Rates
When asked if the Federal Reserve should raise interest rates in December or continue to wait, nearly two-thirds of investors (64%) say “wait,” while a third say to “raise them.” While the slight majority of investors (54%) say an increase in interest rates would not make much of a difference to their personal financial situation, twice as many say it would be bad rather than good for them, 29% vs. 16%. Investors are even more negative in assessing how higher rates would affect the economy, with 48% saying it would be bad for the economy vs. 19% good. Just 30% say it would make no difference.
The Value of Advice
Investors continue to rely on different ways to get financial advice. A plurality of investors, 45%, use a dedicated personal financial advisor, 39% use a financial advisory firm through which they can access a call center and speak to a financial advisor, 29% rely on a friend or family member and 22% use an online financial planning or investing website. During the market volatility in late August, a third of stock investors (33%) consulted with a financial advisor.
“There are a lot of different ways to get financial advice today, but no matter how it’s delivered, the true value of advice is ensuring investors have a financial plan that is regularly monitored by a financial advisor to help them meet their investment goals. If the plan is in line with an investor’s goals and risk tolerance, then investors are better equipped to weather the volatility,” said Toolan.
During the recent volatility, investors who use a dedicated financial advisor were more likely than those who don’t have a financial advisor to:
- Say they paid closer attention than usual to the market: 57% vs. 46%.
- Sell stocks (23% vs. 10%) and to buy stocks (40% vs. 18%).
Of those who have a financial advisor, 78% say they generally follow all or most of the advice they receive from that person, while 22% follow only some or little of it.
Long-Term Investors and Risk Tolerance
Eight in ten investors (79%) say the performance of their stock investments over 10 years is their main focus, whereas 20% say its performance over a six -to 12-month period is more important. Retirees are three times as likely as non-retirees to be focused on the short-term, 39% vs. 13%; nevertheless, the majority of both groups take the long view.
More than half of investors (56%) describe their risk tolerance for a 5%-10% stock market downturn as “moderate,” meaning they “only worry a little;” a quarter say they have high tolerance for market declines and don’t worry at all about these kinds of drops; 18% have little or no tolerance.
When asked how much their portfolio matches their risk tolerance, the majority of investors (73%) say their investments have the right amount of risk for them. Of the rest, four times as many feel they could handle more risk (20%) than say they have too much (5%).
“Market volatility can be tough for investors. While most told us their investments match their risk, financial advisors often find out when they talk to clients that the match hasn’t held up well when the market fluctuated,” said Toolan. “That underscores how client conversations, especially during volatile markets, can help investors stay on track to achieve their long-term financial goals.”
Keeping the Golden Nest Egg Intact
The survey asked retirees about their approach to using their retirement savings. The largest segment, 42%, say they are trying to keep their retirement savings intact and live off the interest, Social Security and other income. Another 35% are carefully spending their retirement savings so it lasts as long as they need it, and 18% are continuing to increase the amount they have saved. Overall, 82% of retirees who are drawing on their retirement accounts are generally confident they can maintain their approach throughout their retirement, although just 28% are highly confident.
Non-retirees and retirees have differing perspectives on investing during retirement. Two-thirds of non-retirees (68%) who own stock anticipate they will continue to invest in the stock market after they retire, significantly higher than the 44% of retired stock holders who say they are continuing to invest in the stock market.
Overall investor confidence in the stock market as a place to save and invest for retirement is also steady, with 43% saying they have a great deal or quite a lot of confidence in the market. Still, the majority have only a little confidence (47%) or none at all (10%).
When polled on if the markets will be better off if the next president is a Democrat or Republican, half of investors (51%) say it will not make a difference; a third say a Republican and 15% say a Democrat.
Read Wells Fargo Investment Institute’s report on Managing Investments in an Uncertain World.
About the Wells Fargo/Gallup Investor and Retirement Optimism Index
These findings are part of the Wells Fargo/Gallup Investor and Retirement Optimism Index, which was conducted October 30-November 8, 2015, by telephone. The Index includes 1,018 investors randomly selected from across the country with a margin of sampling error of +/- four percentage points. For this study, the American investor is defined as an adult in a household with total savings and investments of $10,000 or more. About two in five American households have at least $10,000 in savings and investments. The sample size is comprised of 73% non-retired and 27% retirees. Of total respondents, 42% reported annual income of less than $90,000 and 58% of $90,000 or more. The Wells Fargo/Gallup Investor and Retirement Index is an enhanced version of Gallup’s Index of Investor Optimism that provides its historical data. The median age of the non-retired investor is 46 and the retiree is 69.
The Index had a baseline score of 124 when it was established in October 1996. It peaked at 178 in January 2000, at the height of the dot-com boom, and hit a low of negative 64 in February 2009.
About Wells Fargo & Company (Twitter @WellsFargo)
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.8 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through 8,700 locations, more than 12,800 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 30 on Fortune’s 2015 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially. Wells Fargo perspectives are also available at Wells Fargo Blogs and Wells Fargo Stories.
Gallup delivers analytics and advice to help leaders and organizations solve their most pressing problems. Combining more than 80 years of experience with its global reach, Gallup knows more about the attitudes and behaviors of employees, customers, students and citizens than any other organization in the world.
Wells Fargo & Company
Allison Chin-Leong, 212-214-6674 (Media)
Source: Wells Fargo & Company