The market downturn of 2022 is not weighing on the appetite of a majority of investors in Australia, according to the results of a new survey by trading platform eToro.
Around 55 per cent of those surveyed were either positive or ambivalent about 2022’s bear market. While 18 per cent indicated that the downturn had increased their appetite for investing, 21 per cent said it had helped improve their approach and 16 per cent said it had made them buy the dip.
Older generations were found to be the most concerned about the downturn, with only 26 per cent of respondents aged over 55 expressing a positive or indifferent sentiment compared to 62 per cent of those aged between 18 and 34.
“It might be surprising to see investors so upbeat after the bear market of 2022, but the majority of this cohort think in years and decades, and history is on their side,” commented eToro market analyst Josh Gilbert.
“Consecutive down years are rare for equities and bonds, with an average 18 per cent S&P 500 annual gain following big falls. For those with longer time horizons, the back end of 2022 offered the opportunity for Australian investors to buy companies at lower valuations, improving the outlook for long-term returns.”
Overall, 77 per cent of respondents felt confident about their portfolios, some 11 percentage points higher than the previous quarter while still remaining relatively low compared to some of eToro’s earlier investor surveys.
The firm also found that the perceived threat of inflation is gradually easing among local investors, with 17 per cent viewing it as the greatest threat to their portfolio over a three-month period as of the end of Q4, compared to 18 per cent at the end of Q3.
“Australia is known for its economic strength, setting records of GDP growth and avoiding a recession during the GFC. This has likely provided investors with more confidence in their local economy than other consumers globally,” said Mr Gilbert.
“However, these investors will know that inflation is still yet to peak in Australia and is well above the RBA’s target. So although the RBA might still be able to navigate a soft landing, investors will know that most experts are predicting at least a mild global recession. Many are repositioning accordingly, with more looking into defensive stocks as well moving to cash in Q4.”
A global recession (24 per cent) is seen as being a greater threat than inflation (16 per cent) in the year ahead, with many respondents adjusting their portfolios defensively in response to this potential recession risk while also preparing for future opportunities.
The proportion of investors holding cash assets lifted from 60 per cent in Q3 to 79 per cent in Q3, while the traditionally defensive sectors of healthcare and utilities, and defensive plays in the current environment like staple consumer goods and energy, all experienced an increase of more than 10 percentage points.
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
