Weekly Executive Update: Despite Market Bounce - Investors Bleak on Economy
While investors are happy with their own financial outlook both today and in the future, they remain mostly negative about the economic outlook for the country. Worried about the ongoing impact of the pandemic, as well as the racial tensions and attacks on law and order, investors are not sure of what to expect in the next twelve months. And, of course, the hostility engendered by the upcoming election simply adds fuel to the fire. So what are investors actually thinking six weeks out from the "election of the century"? And how do their feelings impact what they might decide regarding their investments?
Each month since the beginning of 2020, Spectrem has been questioning investors regarding their feelings about the election and how it might impact their investment decisions. Little did we know at the outset that 2020 would experience one of the greatest market collapses and then recoveries in history. In the attached complementary report, Wealthy Investors and the Election: A Guide for Financial Advisors in 2020-September, you can see that for 65% of investors, their financial situation is the same today as it was at the outset of the pandemic. Business Owners, however, have yet to recover in the same way as other households.
But investors remain cautious about the future. When asked to rate their concern level regarding the pandemic on a 0-100 scale, with 0 being “Not Concerned” and 100 being “Very Concerned”, investors rated their concern level at 77.58. This was lower than April when the rating was 87.09, but still relatively high. Additionally, they rated their concern level over law and order in the U.S. at 75.09, almost as high as the rating for the pandemic.
When asked about their outlook for the overall economy in the next 12 moths, 53% of investors feel the economy will be worse in the next 12 months. Results vary dramatically based upon political affiliation.
Fifty-five percent of investors believe the Dow will close over 28,000 at year-end if President Trump is re-elected. (Only 27% feel similarly should Joe Biden be elected.) So why are so few investors optimistic about the economy despite predicting stock market highs?
This is where the advice and expertise of a financial advisor can help investors make the right decisions. As you can see, various segments of the economy have been impacted more than others with the attitudes of Business Owners highlighting those differences. For the most part, those in high level executive jobs at large companies have been able to do their jobs remotely. Yet the previously successful small business owners running retail shops, restaurants and similar types of businesses remain impacted by the pandemic. The irregular and inconsistent response of state governments contributes to the uncertainty and the inability to return to “normal” life remains a drag on overall optimism.
Financial advisors need to have discussions with investors regarding their own circumstances and outlook. When the election is over, many things will become more certain, however, it may still take time for investors to feel good about the economy.