Only 41% of American investors think that this is a good time to invest in the stock market, but if you think that’s a reaction either to full valuations for most of the year or the more recent market corrections you’d be mistaken, most don’t even know that 2013 was a good year for equities.
“The extraordinary performance of the stock market over the past 18 months has not fully registered with most investors,” writes Lydia Saad for Gallup Economy, which defines an investor as anyone with at least $10,000 in stocks, bonds, mutual funds, an IRA or 401(k) for its recent poll. “Although the S&P 500 gained nearly 30% in 2013 — the best performance for this bellwether index since the mid-’90s — less than two-thirds of investors (64%) are aware that average stock values increased in 2013.”
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Majority of American investors prefer cash and CDs to stocks
American investors’ reluctance to put money in the stock market doesn’t seem to have much of anything to do with recent market performance. Looking over the past few years, confidence in the market has dipped a few times but in general stays around 50% saying that this is a good time to invest.
So when 41% say that they would invest an extra ten grand in stocks, versus 36% who would rather hang on to cash and 20% that would buy CDs (with typical interest rates in the 1% – 1.5% range, unimpressive even in this current low yield environment), investors seem to be expressing a general distrust of the market as opposed to taking a view on current conditions.
The Wells Fargo/Gallup survey might seem to contradict the strong inflows into US equities that we’ve seen for most of the last year, but it probably just means that about 10% of the country plays a very disproportionate role in the market.
Most American investors consider themselves knowledgeable, but still want some help
Of the American investors surveyed, 11% said that they were ‘highly knowledgeable’ about investing in the market and another 56% considered themselves to be ‘somewhat knowledgeable,’ which only shows that people have a tendency to overrate their own expertise. The good news, both for investors and for the asset management industry, is that 71% of American investors would prefer getting professional advice before making decisions. So even if they don’t know what’s happening in the market, at least they’re probably talking to someone who does.