Virus Infects Investor Confidence - Investor Pulse

3/1/2020

Perhaps Main Street investors, the people whose interest in the stock market revolves around their 401(k) accounts and their personal portfolio of investments, know more than they are given credit for.

The February explosion of the stock market, which saw a late-month meltdown at a level last seen in October of 2008 as the harbinger of the Great Recession, may have been sensed by affluent investors, who, prior to the stock market slide, indicated their intentions to move away from further investment until the global coronavirus concerns were mollified.
In mid-February, Spectrem conducted its monthly survey of affluent investors to measure their confidence in the stock market and the American economy. The Spectrem Affluent Investor Confidence Indices survey was conducted from Feb. 19-22, as coronavirus cases continued to pile up globally but the stock market indices in the United States continued to reach new record closing highs.
Amid that confusion, more Main Street investors reported their intentions to stay on the sidelines for the coming month as the yin and yang of the investing environment settled itself.
The Spectrem Confidence Indices calculate how investors feel about the current investing atmosphere as well as their general outlook about their personal economic situation. In February, the Spectrem Affluent Investor Confidence Index (SAICI®), measuring the confidence of investors with $500,000 or more in investable assets, fell from 8 to 5, while the Spectrem Millionaire Investor Confidence Index (SMICI®), which measures the confidence of investors with $1 million or more in investable assets, dropped from 15 to 10.
These new measures must be considered with the knowledge that the January levels were unusually high. The mark of 15 among Millionaires in January was one of the highest marks in the history of the SMICI. The SAICI, which is always lower due to more restrained confidence among investors below the $1 million investable assets threshold, was also notably high in January. Therefore, the drops in those numbers in February was not unexpected.
However, the Spectrem Indices survey ended two days before the Dow Jones Industrial Average fell more than 1,000 points in one day due to an increase in fatalities from the coronavirus reported in both China and Italy. That loss was repeated and extended on Feb. 27 when the DJIA fell by almost 1,200 points in one day.
Some of the notable numbers reported in the Spectrem Confidence Indices in February include:
• Increased investing in individual stocks among Millionaires fell from 34.6 percent to 31.0  percent. However, throughout the bull market which ran all of 2019, increased investing in individual stocks ran above 30 percent in nine of 12 months, so the February measure is not much of a negative; it is just lower than the enthusiasm recorded in January.
• Increased investing in stock mutual funds among Millionaires fell from 43.1 percent to 39.7 percent in February, but, again, the mark in January was the highest mark in almost two years, so a decrease was expected.
• Among both Millionaires and non-Millionaires, the percentage of investors not increasing investment allocations in any category rose. Such non-participation is considered a measure of caution as investors keep an eye on how the stock market responds to current economic
and global issues.
The monthly Spectrem survey also creates a Household Outlook indicator, which reflects how investors feel about four components of their personal finances. While investors indicated a slightly higher Outlook for their household assets due to the continued high level of return in investments overall, the Outlook for household income, company health and economy all dropped, as did the overall Outlook number. In each case, however, the decrease in Outlook was small.
The overall Outlook dropped from 26.70 to 23.20, although the February Outlook number remains higher than any Outlook mark recorded since July. The Outlook for household assets increased more than two points to 53.60, the highest mark in that category since March of 2018.