Investor Confidence Nudges Upward

6/1/2020

Investors are not likely to return to pre-coronavirus levels of confidence about investing any time soon, but they are keeping a watchful eye on current stock market performance while maintaining their low level of confidence displayed in April. 
Spectrem’s Investor Confidence Indices, which plummeted in April as investors reacted strongly to the stock market crash resulting from economic reaction to the coronavirus, nudged in a positive direction in May while remaining at a very low level. 
The Spectrem Affluent Investor Confidence Index (SAICI®), which measures investment intentions for investors with at least $500,000 in investable assets, rose from -12 to -10 in May after recording a 13-point drop in April. The Spectrem Millionaire Investor Confidence Index (SMICI®), which measures investment intentions for investors with at least $1 million in investable assets, rose from -8 to -6 in May after its own 15-point drop in April. The last time the SMICI reported a negative confidence rating in consecutive months was in November and December of 2012.
The indices are comprised of a number of elements. Investors are asked their investing intentions for the coming month, and in May, the most demonstrative decision was to pull back from investing or maintain current levels of allotments. Among non-Millionaires, 47.5 percent chose not to increase investing for the coming month, and that was an even higher percentage than the 44.3 percent who made that decision in April, when investors were really reeling from the impact of the virus on the stock market. 
Among Millionaires, 39.1 percent indicated they were not going to invest more in the coming month. That is the highest percentage of non-involvement among Millionaires since May of 2017, two years ago.
There was, however, one notable area in which interest increased. Individual stock investing interest rose from 28.40 in April to 30.40 in May, as some investors looked to take advantage of low stock prices, anticipating an eventual return to higher numbers in the near future. It has been almost a year since the last time 30 percent of investors expressed an interest in increased individual stock market investing. 
Confidence plays an important role in the investing intentions of investors. Increased confidence can begat more confidence; as the stock market reacts to renewed investor interest, more investors take note and increase their own interest in moving back into the stock market. 
The Spectrem Investor Confidence Indices measure not only the confidence investors have in investment options, but also their outlook on the future of their household finances. The Spectrem Household Outlook measurement also moved upward slightly in May.
The Spectrem Household Outlook takes into consideration what investors think about four components of their personal financial picture: household assets, household income, company health and their opinions about the economy as a whole. Putting a number to their feelings about those components allows Spectrem to create an overall Outlook rating, and in May, that rating was only slightly better than it was in April, when investor outlook was at its lowest point in years. 
For comparison sake, in April, the Spectrem Household Outlook registered an overall number of -24.50. That was not only the first negative Outlook figure since February of 2013, it was the lowest such figure since February of 2009, when the world was still pulling itself from the Great Recession.
In May, the overall Outlook rose to -16.90, an improvement overall that came about because investors generally had a slightly better outlook for their household assets, household income and the economy as a whole. Where their Outlook did not improve was in consideration of their company health.
The Outlook for company health fell from -23.60 to -24.40. While the economy is making incremental improvements as it learns the full extent of the dangers of the coronavirus, many companies are finding it difficult to get back to full capacity of both output and income, and people who work for those firms or invest in those firms are battling to keep their faith that mattes will improve over time. 
Looking ahead to June, it has been eight years since the Outlook has recorded a negative rating three months in a row. Should the outlook remain negative in the next month, this will mark a very low level of investor outlook over an extended period of time.