22 JUN, 2023
By Constanza Ramos
After a tumultuous year in which stocks had their worst year since 2008, bonds delivered their worst losses ever, inflation hit a 40-year high, and central banks implemented the largest interest rate hikes in over 40 years, investors around the globe remain remarkably positive in 2023.
Results from the 2023 Natixis Global Survey of Individual Investors find that 68% of the 8,550 people in 23 countries surveyed share a positive outlook on the state of their finances today, as 30% say they’re confident, 24% say prepared, and another 15% feel fortunate.
Most surprising is that given the reality of last year’s losses, lingering inflation, and rumblings about recession, only one-third of those surveyed have a negative outlook on their finances: only 22% find themselves stressed, 7% say they’re depressed, and 3% feel like they’ve failed.
Based on the fears, misconceptions, and miscalculations that investors expressed in their survey responses, it seems that many more investors should be feeling uneasy or stressed in 2023. Stressed because today’s macro and market scenario is much different from the one that drove double-digit returns since the Global Financial Crisis.
The positive vibes may last only so long as the economy and the markets are undergoing shifts that could trigger investors’ biggest fears and shed light on critical gaps in their investment knowledge. It’s a combustible combination that could lead to irrational behavior and costly mistakes.
The world has changed, and many investors are not prepared to travel over unfamiliar terrain: The economic landscape has gone from low inflation, low rates, and low dispersion to higher inflation, higher rates, and higher dispersions.
Survey results show that investors face their biggest financial fear in rising prices. They also reveal a critical lack of knowledge on how interest rates affect their investments. And they uncover bad assumptions about the safety of passive investments – especially in times like these.
Markets have gone from high returns with low risk to lower returns with greater risks.
The decade between 2012 and 2021 was a free lunch for investors, with the S&P® delivering an average return of 16.5% annually1 . And it ran up big returns with lower volatility until the global pandemic struck in 2020. In the aftermath, investors have yet to make a meaningful adjustment to their return assumptions and reassess where their real risks lie.
The reality has gone from “set it and forget it” to “go get professional advice.”
The constant upward trajectory of investment markets could make even the least experienced investors look smart by simply buying an index fund. Facing a more complicated world and more challenging investment landscape, investors are beginning to realize the true value of professional advice and set specific service expectations for their advisor.
With so much change under way, investors have much to consider and much to learn. If they’re to adapt, they will have to confront their biggest financial fears and address their most pressing investment concerns. Coming to grips with inflation is the first step for many.