U.S. Investors Cautious After Stellar 2013

Terry Flanagan

Following the off-the-charts performance of the U.S. equity markets in 2013, American investors are taking a more cautious attitude, in contrast to investors globally. The increase in global investor confidence has led investors to return to the equity markets, with many looking beyond their own countries to find investment opportunities with the strongest returns.

“Even though the U.S. market was up 20-30%, depending on the index, people still feel that emerging or Asian countries offer great opportunity,” said Carter Sims, head of U.S. intermediary distribution at Schroders.

Year over year investor confidence in the U.S. dropped from 59% in 2012 to 37% in 2013, whereas investor confidence rose around the world, according to the Schroders Global Investment Survey. “One conclusion we can draw is that there were great returns in the U.S., but people are still worried about U.S economic stability, interest rates, taxes, debt ceiling,” Sims said.

The U.S. central bank is also taking a cautious approach with regard to monetary easing, promising not to put the brakes on its quantitative easing program too quickly.

“We see accommodative monetary policy as remaining appropriate for quite some time,” said Fed chair Janet Yellen during Senate testimony on Thursday. “There’s no conflict at all at the moment between the two goals the Congress has assigned to us of promoting maximum employment and price stability.”

After an excellent 2013 in equities, 82% of global investors are looking to increase the amount they invest in 2014, and 70% are looking to invest in equities, according to the survey. Global investors feel that Asia/Pacific remains the best place to drive overall return, with 39% favoring Asia/Pacific, followed by U.S. at 31%, and Western Europe at 27%. “After a 30 year run in the bond market, we experienced some volatility in 2013,” Sims said. “Around the globe people saw good equity returns, especially in the U.S.”

Sims, who is responsible for the strategic direction of the U.S. intermediary distribution channel, said that Schroders performed the survey in order to provide investors with a barometer of sentiment around the globe.

“We are living in a global world, and since Schroders is not headquartered in the U.S., we believe we get a better feel for the pulse of investors around the world, whereas a lot of our competitors tend to be U.S.-centric in their investment outlook,” he said. “In the Schroders Global Investment Trends Survey, we can see how investors are feeling in countries like Asia, Latin America, and Europe. This provides indicators on what local investors are looking to do globally, as well as what global investors are doing in their home countries.”

Schroders created a confidence heat map by country that shows there are very high numbers in India, where confidence is 90%, and Japan at 76%, Spain at 52%. “We’re seeing the economy coming back in the UK and Western Europe. In certain parts of the world, stability is coming back,” Sims said. “When we asked what the most popular equity investment options were, the three that we saw were U.S. equities, multi-asset funds, and emerging market equities.”

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