Investment trends start somewhere, and most investors are followers. There is an art to being the investor who climbs into an investment product as it prepares to grow in value, and those investors are probably the wealthiest of the bunch.
Financial advisors and attuned investors pay attention to dozens of indicators. Economic forecasts and stock market performance share headlines on a daily basis, and investors and advisors react accordingly.
But the wealth of information available to investors today, and the speed with which those numbers are disseminated thanks to the internet, raise a question about the impact of the numbers that are issued daily.
What numbers actually matter to investors? When it comes to the statistics that bombard viewers of stations like CNBC or Fox Business, which of those numbers that scroll across the bottom of the page, or the ones that flip from Dow Jones to S&P to NASDAQ, really click with investors?
There is no one answer that all investors give. What matters to advisors is understanding what numbers matter to their clients, and perhaps it is useful to know which clients watch which numbers.
The topic comes to mind when studying the latest results from the Spectrem Investor Confidence Indices for February. The Indices, which study investor sentiment among affluent investors with $500,000 in investable assets to the Millionaire investor with $1 million or more in investable assets, is a gauge that reflects the confidence investors have in the prospects that their stock market investments will provide an acceptable rate of return.
The indices, which both went up notably in February after a significant downturn in December following the stock market slide, do a tremendous job of reflecting the confidence of investors as it relates to the stock market.
But the Spectrem indices also include the Spectrem Household Outlook, which reflects how investors feel about the way their household economics are being impacted by economic conditions in the United States. The economy, household assets, household income and company health are the factors that investors rate relative to how those factors are responding to economic pressures.
Where the Indices are a reflective measure, the Outlook is a measure of optimism about the future. They are not opposing measurements, but they do show how investors operate: do they look at today’s results or consider tomorrow’s possibilities?
In Spectrem’s study Portfolio Decision Making, investors were asked which stock market indicators they pay the most attention to. Among all investors, the DJIA was selected by 41 percent of investors, the S&P 500 was selected by 31 percent, and the NASDAQ was selected by 11 percent. Sixteen percent said they paid no mind to stock market indicators.
For those investors who do not watch the tickers, what numbers matter to them? Do they hang on corporate earnings reports, or employment numbers, or details about the U.S. budget deficit or the national debt?
As stated earlier, every investor is different, but advisors need to know which numbers cause shivers or goosebumps in their clients. At the same time, advisors need to let their clients know which numbers they pay the most attention to so their clients understand where they are coming from when they make investment recommendations.
Statistics can be used to prove anything, but economic indicator numbers provide more detailed information. The question is whether anybody believes in them and how they react when the new numbers are released.
©2019 Spectrem Group