Investors Show Growing Optimism for Stocks,But Stick to More Conservative Strategies in 2013

Investors See Best Opportunities in Stocks Abroad, Cite Saving for Retirement as Top Goal According to Franklin Templeton Global Investor Sentiment Survey.

While over 60 per cent of global investors believe their country’s stock market will be up in 2013, risk continues to be a concern. In addition, two-thirds (66 per cent) of investors now expect the best equity and fixed income opportunities will be found outside their home market this year (2013), reflecting growing optimism for global investing, according to a Franklin Templeton investor survey.

The 2013 Franklin Templeton Global Investor Sentiment Survey http://www.franklintempleton.co.za/en_ZA/investor/campaign/giss/global-investor-survey.page polled 9,518 investors in 19 countries across Asia Pacific, the Americas and Europe on their current attitudes towards investing and their expectations for 2013 and the decade ahead.

Overwhelmingly, investors around the globe have higher expectations for 2013 stock market performance, particularly in emerging markets where 66 per cent expect their local stock market will improve (versus 58 per cent in developed markets). However, despite this optimism, 57 per cent of those surveyed plan to pursue a more conservative investment strategy this year with younger investors (aged 25 to 34) leading the charge toward “safer” havens.

Jo-Anne Bailey, Sales Director & Country Manager for Africa at Franklin Templeton Investments, commented:

“This survey gauged the sentiment of 9,518 investors around the world regarding their investment outlook, goals and strategy for 2013 and their views on the decade ahead. One key finding showed that 66 per cent of global investors expect the best equity and fixed income opportunities will be found outside their home markets this year, reflecting a growing optimism for global investing. However, despite this optimism, it appears that avoiding loss, rather than achieving higher returns, is still a top priority. As seen in recent years, this risk avoidance has led many investors to remain on the side-lines, missing opportunities.”

Wylie Tollette, director of Performance Analysis and Investment Risk for Franklin Templeton Investments added, “Many investors need to rethink risk and focus on the long term. Risk avoidance and risk management are two different things. Trying to avoid short- term risk and volatility entirely may expose investors to other kinds of risks, such as inflation and the impact of rising interest rates. These longer-term risks can negatively impact their ability to meet their financial goals.”

Contributing to investor risk aversion, more than half (51 per cent) of investors globally incorrectly believe their domestic stock market was flat or down last year, when in reality, every market surveyed experienced an increase except Spain—and the MSCI World Index was up nearly 17 per cent.

Investors See Best Opportunities Abroad

Despite reporting an overall tendency toward more conservative investing, investors recognize the opportunities of investing abroad.

Reflecting growing optimism for global investing, two-thirds (66 per cent) of investors now expect the best equity and fixed income opportunities will be found outside their home market this year (2013). Considering performance of equities by geographic region, the highest portion of investors (28 per cent) believes that Asia will provide the best equity return opportunity in 2013. Asia was also selected, with the portion increasing slightly to 33 per cent, when investors considered equity returns over a 10-year period.

While investors are not quite ready to send the majority of their assets overseas in 2013, they do plan to invest nearly 40 per cent of their assets in foreign markets over the next 10 years, split evenly between developed and emerging markets.

Only in Australia and the United States do the majority of investors see the best equity and fixed income opportunities at home rather than abroad, as they plan to keep about three-quarters (77 per cent in Australia and 74 per cent in the United States) of their assets at home over the next 10 years.

Retirement is Top Investment Goal

Retirement is the top investment priority globally, with about a third (31 per cent) of investors selecting it as their top investment goal in 2013. The selection of retirement was highest in the United States and Canada (54 per cent), while lowest among investors in Latin America (18 per cent) and parts of Asia Pacific (29 per cent). The top goal in those two regions is saving to purchase a new home (38 per cent in Latin America and 31 per cent in Asia Pacific). At 12 per cent, Europe had the highest number of investors who indicated that saving for emergencies was their top goal.

Younger Investors Most Conservative, Global-Minded

Over two-thirds of younger investors (aged 25 to 34) do not see stocks as essential to meeting their long-term investment goals. Compared to the other age groups surveyed, they are also least likely to expect stocks to outperform other asset classes and more likely to be conservative in 2013. That said, younger investors have more of their assets currently invested abroad, at an average of 38 per cent, and show a greater willingness to invest abroad going forward.

Benefits of consulting with a financial advisor

Globally, those who work with a financial advisor are more geographically diversified with their investments, had a more accurate view of past stock market performance and were more likely to identify themselves as being optimistic about reaching their financial goals (82 per cent) than those who do not (76 per cent).

“Navigating global markets can be complex and investors can benefit from working with a financial advisor to appropriately position their portfolios to meet their investment goals,” added Jo-Anne Bailey. “These survey results underscore the importance of investor education, especially among younger investors, who have not experienced as many market cycles and whose attitudes may be especially influenced by more recent market volatility.”

Stocks, Precious Metals Lead Asset Class Expectations

Globally, stocks and precious metals were each selected by 21 per cent of investors as the asset classes expected to perform best in 2013. However, those residing in developed markets generally have a more favourable outlook for equities, with Australia, Canada, Hong Kong, Japan, Singapore and the United States expecting stocks to be the top performing asset class this year.

As investors look further into the future, they expect real estate to outperform all other asset classes over a 10-year period, with the largest portion of investors (22 per cent) seeing the greatest investment return in that asset class. Stocks and precious metals, each selected by 19 per cent of investors, were not far behind.

Methodology

The Franklin Templeton Global Investor Sentiment Survey, conducted by ORC International, included responses from 9,518 individuals in 19 countries: Brazil, Chile and Mexico in Latin America; Australia, China, Hong Kong, India, Japan, Malaysia, South Korea and Singapore in Asia Pacific; France, Germany, Italy, Poland, Spain and the UK in Europe, and the United States and Canada in North America. Survey respondents were between the ages of 25 and 65 in Latin America and Asia Pacific and 25 and older in Europe and North America. Respondents were required to own investable assets, such as stocks, bonds, mutual funds, etc. In addition, a minimum investable asset threshold was set for each country to ensure that the respondent had sufficient investments, providing a knowledge base from which to answer the survey questions. Surveys were completed from January 14 to 25, 2013, in all countries.