Invesco Study Finds: Volatility Impacts Market Sentiment; Advisors Are Decisive, While Investors are Becoming More Confused

According to a study commissioned by Invesco Ltd., the volatile markets are making investors increasingly confused, while advisors are more resolute. However, investors and advisors are committed to their long-term strategies despite their differing sentiments.
The Investor and Advisor Pulse Study, conducted by GfK, a global market research institute, surveyed over 800 advisors and 1,015 investors who work with a financial advisor and have at least $100K in investible assets. Two waves of the survey took place in January and April 2018, in order to compare the sentiment of investors and advisors before and after the February downturn.

Among the survey's findings:

• After February's downturn, 57% of investors expect a disruption will occur this year compared to 49% in January. Advisors barely flinched after the downturn with 56% expecting a disruption compared to 54% in January.

• The number of investors who say we are in a bull market dropped precipitously from 65% in January to 37% after the market correction, while advisors' opinion that we are in a bull market decreased far less – to 61% from 73% in January.

• Post correction, 69% of investors say it is a good time to invest, down from 80% in January. 87% of advisors think it is a good time to invest remaining unchanged after the tumultuous February markets.

"After a long period of growth, financial advisors and investors need to get used to an ongoing environment of uncertainty," said Kristina Hooper, Invesco's Global Chief Market Strategist. "This research demonstrates that investors are confused and overwhelmed, causing them to react emotionally. Now more than ever, advisors need to educate and support their clients to help them reach their individual investment goals."

Financial advisors' primary concerns are rising interest rates and rising inflation, while investors are focused on Congress and the federal budget deficit. Both groups agree that a trade war is also a top concern that could lead to a downturn this year. In addition, they both see a recession on the horizon by 2021, but not in the next 12 months. Both groups see two to three more market adjustments this year and say that the market would have to decline by more than 20% to be considered a true disruption.

Market volatility has affected investors' expectations of the market for the next 12 months. Investors remain committed to their investing strategies, but their view of the U.S. and global economies, as well as their own personal financial situation has worsened. For example, 27% think the global economy will be worse in the next 12 months versus only 17% in January and their outlook on the U.S. economy is 6% worse than January at 27%. Their pessimistic view on their personal financial situation has doubled from 4% in January to 8% in April.

Despite their concerns, advisors remain confident in the market and the global economy. Among those sampled, 87% of advisors believe this is a good investment climate. Half of the advisors still agree that both the U.S. and global economies will be better 12 months from now, but they are aware that their clients are more cautious since the recent market volatility.

Investors and advisors are preparing for more market volatility. While over half of the investors said their advisors reached out to them during the rocky times in February, one-quarter who did not hear from their advisors felt disappointed. That said, most investors continue to rely on their advisors for guidance and will work with them to strategize against future volatility and possible market downturns. 

"It's not surprising that investors' concerns are growing, and they should be prepared for more volatility, as well as the greater likelihood of a stock market sell-off in the coming months," said Kristina Hooper. "They should continue to work closely with their advisors to plan for the likelihood of ongoing uncertainty by staying the course to meet their long-term investment outcome objectives."

GfK conducted an online survey of 1,015 investors who use a financial advisor and have at least $100K in investible income using KnowledgePanel™ and 811 financial advisors using an opt-in sample. The investor survey was conducted from January 18-23, 2018, while the financial advisors survey was fielded from January 18-27, 2018. Importantly, these surveys were fielded before the recent market changes that began on February 5. The margin of error for the KnowledgePanel investor sample is +/-3.4 percentage points.

GfK conducted an online survey of 500 investors who use a financial advisor and have at least $100K in investible income using KnowledgePanel™ and 403 financial advisors using an opt-in sample. The investor survey was conducted from April 10-17, 2018, while the financial advisors survey was fielded from April 10-26, 2018. The margin of error for the KnowledgePanel investor sample is +/- 4.8 percentage points. Totals may appear as though they do not to sum to 100% due to rounding and refusals.

Invesco is an independent investment management firm dedicated to delivering an investment experience that helps people get more out of life.

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