What do investors really think about the financial markets and economic conditions? Depends on which survey is doing the asking and which questions they ask.
The investing sentiment survey released today by Boston-based MFS Investment Management focused on attitudes about inflation. And the results show that investors (61% of respondents) are more concerned about rising inflation during the next 12 months than financial advisors, of which only 41% said inflation will be a concern for investors. MFS considers that a significant disconnect between the two camps.
In addition, the survey found that investors are socking away too much cash rather than putting it to work in the markets. Cash reserves were highest among Generation Y respondents (33%), followed by Gen X (27%) and baby boomers (26%)
"The conversation needs to shift now, from talking about missing market rallies to what's actually happening to their clients' current and future purchasing power--it is eroding," said William Finnegan, senior managing director and head of U.S. retail marketing for MFS. "Investors are unaware of the 'cost-of-comfort' that comes with the perceived safety of cash--their cash is steadily losing value due to inflation."
For sure, interest rates are scraping the bottom at under one percent while inflation has jumped from 0.1% in 2008 to 3.0% last year. But boomers, along with Gen X and Y investors, still hold negative views (less than 50% consider them an "excellent/very good place to invest") across major asset classes comprising domestic and international stocks and mutual funds, corporate and government bonds and bond funds, real estate and banks, CDs and money market accounts.
The survey, which was conducted in February and polled 974 investors with at least $100,000 in investable assets and 621 licensed financial advisors (either SEC or Finra), found sentiment across 13 categories covering economics, health care, politics, and interest rates has generally improved since last October. However, their concerns are still heightened and a majority of concerns remain higher now than a year ago.
Meanwhile, MFS' crosstown rival, John Hancock Financial Services, today released its own investor sentiment survey that indicates investors are borderline giddy. Specifically, investor sentiment rose to +21 in this year's first quarter, or a hefty jump from the +15 score in last year's fourth quarter. That represents the largest increase since the index was started in early 2011.
Furthermore, 56% of survey respondents said they are bullish on stocks, as well as energy (55%), balanced mutual funds (54%) and technology (53%).
On the flip side, almost two-thirds said they believe it's a bad time to be holding cash in CDs and money market accounts. And whereas nearly 30% said it's a good time to invest in bonds, another 26% said it's a bad time to buy them.
"Economic indicators suggest the internal dynamics of the U.S. economy look pretty good right now, and investors appear to be in sync with that," said Bill Cheney, John Hancock's chief economist. "Their optimism for equities and less positive attitude towards fixed products show that investors are gaining confidence that the country is starting to pull out of its economic downturn. They are beginning to consider taking action by moving their money from the sidelines and into the market."