Data & Research November 11, 2011

Affluent Investors Have Grim Outlook

Eighty percent of Fidelity Investment’s affluent customers expect market volatility to be the norm for the extended future.
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Fidelity conducted a poll of its affluent customers prior to a panel discussion earlier this month that covered topics including market volatility, emerging markets, and European debt.

“The European debt crisis, recession fears and potential tax increases have stopped many U.S. investors in their tracks, and they are looking for ways to re-engage with an investment strategy that fits their risk tolerance and helps them achieve their financial goals,” said John Sweeney, executive vice president, Fidelity Investments. “In talking with these affluent investors, they are looking for sound investment guidance about their portfolios, so they can weather the daily fluctuations.”

This was the fifth roundtable held by the firm in recent months, and was designed to provide investors greater access to market insights from experts both inside and outside Fidelity. Key findings of the poll include:

  • European Debt to Have Lasting Impact – Sixty-five percent believe that the European debt crisis will impact the U.S. equities market for at least a year.
  • S&P to End Year Flat or Down With Ongoing Volatility – Nearly two-thirds (65%) said they believe the S&P 500 is going to end the year either flat or down. Additionally, 80% expect market volatility will be the norm for the extended future.
  • Low Interest Rates Reduce Income – Eighty-two percent of respondents said historically low interest rates were reducing their investment incomes.
  • Jobs Key to Economic Recovery With Double Dip Likely – Nearly three-quarters (73%) said a large drop in the unemployment rate is needed to spur strong economic growth, but 64% said a double dip recession is likely or already here.
  • Companies Must Continue to Invest – Sixty-one percent believed that profitable companies should use cash for capital improvements or hiring new employees, versus holding it in reserve (18%) or distributing as dividends (21%).
  • Tax Increase Concerns – Potential income tax increases were the most concerning for respondents (39%), with capital gains tax increases second (28%). 

Respondents also reported on their current buying and selling strategies. Most respondents see long-term (67%) or short-term (21%) buying opportunities with current stock conditions. Few (12%) view the current market conditions as a selling opportunity.

Additionally, Fidelity published a whitepaper that highlights the content covered in the roundtable. The panel, moderated by Sweeney, comprised portfolio managers from Fidelity (Larry Rakers and Chuck Myers), Tocqueville Asset Management LP (J. Dennis Delafield), Artio Global Management LLC (Greg Hopper), and Weitz Funds (Wally Weitz).

The Viewpoints article and supporting videos from the roundtable event can be found at www.fidelity.com/viewpoints.

The Fidelity Inside/Out Roundtable Event Poll was conducted November 1, 2011. On average, 659 attendees responded to each question.  

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