Investors may be gearing up for a rocky road in the months ahead, as a new survey suggests optimism in the stock market is lower than it’s been in three years. Yet despite a declining confidence in the market, a majority of those polled remain bullish about their own financial futures.
Financial services company Wells Fargo and data analytics company Gallup join forces to produce the Wells Fargo/Gallup Investor and Retirement Optimism Index each quarter, which tracks investor sentiment about the following 12 months.
Overall, the survey showed, investor optimism has fallen significantly, as the index score for the third quarter was 72, or 13 points lower than the second quarter-score of 85. It marked the largest quarterly drop in more than three years, but the index at its lowest point since the fourth quarter of 2016.
The index focuses on four key areas: unemployment, economic growth, stock market performance and inflation. Investors provide their outlooks on each of these economic indicators, and for the current quarter’s survey, respondents were less optimistic about all of them.
This most recent index measured responses by 2,091 investors from households with at least $10,000 in securities. Of the responses, collected Aug. 5-11, approximately 39% were from retirees, and 59% came from households with incomes of $90,000 or more.
Nerves have been rattled among investors of different stripes, as confidence fell comparably among both retirees and non-retirees, as well as those who have $100,000 or more in the markets and those with less than $100,000 in investments.
With confidence dropping, some investors may be considering putting a pause on their investment activity. In fact, the index found that 59% of investors this quarter said this was a good time to invest in the stock market, down from 65% last quarter.
The market may falter, but I am fine
While investors may not be feeling good about the market, most are feeling comfortable with their own personal financial outlooks. A majority of respondents — 76% — said they either feel “very confident” or “somewhat confident” that they will be able to maintain their preferred lifestyle through retirement, regardless of what the market is doing right now.
In fact, investors may be slightly more optimistic about their personal futures despite their concerns about the broader market. Optimism about reaching five-year investment goals and optimism about reaching 12-month investment targets each rose 3 percentage points over the previous quarter, the survey found.
While fluctuations in the economy can be nerve-wracking for investors, it’s important to take a long-term approach to the market. Not only should you should have a thorough understanding of all of the risks, but you should make sure you are only investing money that you won’t need in the near future.
When it comes to investing, you also want to make sure you don’t have all of your eggs in one basket. Try to have a diverse portfolio so you can withstand the market’s ups and downs.