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Investors ‘surprisingly’ confident about the outlook

Andy Sowerby

Australian investors are more confident about the outlook for investment markets over the year ahead than their counterparts overseas, and a significant number see volatility as an opportunity, the latest annual Legg Mason Global Investment Survey reveals.

Australian investors see the best opportunities in the year ahead coming from domestic stocks, followed by international stocks, real estate and then cash.

The survey of 16,810 active direct investors, including 1000 Australians, found that “investors globally are confident, conviction-led and increasingly ethical.”

While 58 per cent of respondents globally say they are confident about investment opportunities in the year ahead, 68 per cent of Australian investors are confident.

Global stock market volatility is a concern for 43 per cent of local investors (compared with 42 per cent globally). However, 38 per cent of the Australian respondents say volatility is a positive, 37 per cent see its impact as neutral and only 18 per cent see it as a negative.

“Rather than being fearful of market volatility, many investors see this as a long-term buying opportunity and say they would invest more in a market correction. Investors appear to be taking a more pragmatic assessment of risk.” says Andy Sowerby, Managing Director, Legg Mason Australia and New Zealand.

“In our view investors were surprisingly confident, maybe too much so when it comes to equities.”

When asked about the best asset classes for the next 12 months, local investors expressed confidence in their own equity market, with 41 per cent nominating domestic stocks, 37 per cent international stocks, 32 per cent real estate and 27 per cent favouring cash.

Investors’ prime concerns include global economic instability, the cost of health insurance, and low interest rates.

According to the survey, Australian investment portfolios are made up of 27 per cent cash, 25 per cent equities, 18 per cent real estate/property funds, 16 per cent fixed income, 9 per cent alternatives and 5 per cent gold and precious metals.

Globally, the trend has been to allocate more to equities, accompanied by reductions in cash and fixed income holdings. The survey also reveals a marked increase in positive sentiment towards bonds.

“High quality fixed income remains the safe haven asset class of choice for the majority of investors globally,” Sowerby says.

Among other finding in the survey:

  • advised investors are more confident about the outlook than their non-advised counterparts, and they have more diversified portfolios;
  • millennials are starting to flex their financial muscles, expressing higher than average levels of confidence and looking for higher returns;
  • sustainability considerations are driving investment decisions more than ever before, with 49 per cent of investors globally saying they choose funds or companies to invest in according to ESG considerations; and
  • investors are in no hurry to use robo advisers, with 75 per cent of Australian investors saying personal customer service can never be replaced by technology.