- Aussie retail investors are most likely to think a sustained bull market will begin in the first half of 2024
- Looming inflation fears impacting sentiment, with portfolio confidence down versus Q1
- Aussie retail investors to prioritise financial services, tech, and real estate sectors for the remainder of 2023, with discretionary consumer goods and communications the least appealing sectors.
Market Rally
Most Australian retail investors see the recent surge in equity markets as a false dawn, with just one in ten (10 per cent) believing we have entered a new bull market, according to data from the latest ‘Retail Investor Beat’ survey. In the quarterly survey of 10,000 retail investors across 14 countries (including 1,000 retail investors from Australia), a significant 24 per cent of Australian respondents said they did not know when the next sustained bull market will begin, reflecting retail investors’ current lack of surety. Among the more certain survey respondents, the most common prediction for a market turnaround was the first half of 2024, with 22 per cent backing this belief.
Investor Confidence
The growing confidence in 2024’s potential for change reflects the recent momentum in equity markets, driven largely by AI interest and the recovery of the wider tech sector. As a result, retail investors are feeling slightly more optimistic than they were three months ago, despite growing inflation fears. Some Retail Investor Beat confidence metrics rose, with the number of investors feeling confident about the domestic property market increasing by nine percentage points, those confident about the global economy up by 19 percentage points and those regaining faith in the Australian domestic economy up 11 percentage points (to 52 per cent, 31 per cent and 42 per cent respectively). However, local investors are feeling less confident in their portfolios, down four percentage points from last quarter to 73 per cent. Meanwhile, the threat of inflation surged to become the biggest received risk amongst Australian retail investors (22 per cent), while fewer saw the risk of a local recession as the top risk (17 per cent).
eToro Market Analyst Josh Gilbert, said: “It’s been a great start to the year for equity markets, but it’s good to see investors not getting ahead of themselves. Central Banks globally, but particularly in Australia, have been quick to remind us that bringing inflation down, by whatever means, is their mandate, and that is probably taking some wind out of investors’ sails. ”
Bullish on Financials
While portfolio confidence has dropped, a lot of retail investors are still backing the markets. Over the last three months, 26 per cent increased the amount of money they regularly contribute to their portfolio, while just 11 per cent scaled back their contributions. The picture is similar over the next three months, with 31 per cent planning to up contributions while 10 per cent say they will reduce them. Retail investors are also feeling bullish about certain sectors, with financial services and real estate leading the way. When asked which sector they are most likely to increase their investment in for the remainder of 2023, 16 per cent said financial services and real estate, with 13 per cent opting for technology and 12 per cent opting for Artificial Intelligence (AI). The least appealing sectors to investors are discretionary consumer goods (3 per cent) and communications (3 per cent).
Gilbert adds: “Tech stocks have been the place to be this year, and retail investors are sticking with their long-standing bullishness, reflecting their younger and digital native roots. Investor confidence may be down slightly, but his year has shown why time in the market and staying invested is so valuable to investors. There is always something to worry about, but markets have shown they are resilient. Investors are also feeling savvy, with a contrarian view on display, with a focus on financials and real estate stocks that have been some of the worst performers this year. If economies stay resilient and interest rate cuts appear soon, this could be prescient.”
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