Investor confidence continue to decline in the fourth quarter as many contend with inflation and other issues, but the drop in confidence appears to be slowing, according to J.D. Power’s latest U.S. Investor Confidence Index.
Since June, the company has been conducting quarterly surveys to gauge the confidence level of those who own an investment account and have at least $100,000 in investable assets. The latest study polled 1,919 adults.
Since the outset of the study, investor confidence in the economy has dropped rapidly, the company said. However, in the latest index, which was released today, confidence dropped at a slower rate.
The investor confidence score was 581 out of 1,000. This represents only a 15-point drop from the previous study, which came out last September. This is a modest reduction compared to the previous decline of 36 points that occurred between the first and second study, according to Michael Foy, senior director and head of Wealth Intelligence at J.D. Power.
There were additional positive signs from investors, including the fact that 91% of investors surveyed said they will either maintain or increase the amount of money they invest this year, the report said.
“Folks are not expecting markets to decline severely because by about a six to one ratio they are much more likely to say they plan to increase investments in the next three months versus decrease it,” Foy said.
Inflation continues to be a primary reason for the lack of confidence, the study found. Only 24% of those surveyed said they were confident in their ability to keep up with inflation, which is down from 27% in the previous study.
Inflation was ranked the lowest out of eight different factors that investors had confidence in. Taxes and current and future healthcare costs were the next two lowest on that list, Foy said.
The fears about inflation continue to persist despite signs that the numbers might be improving. While investors are not experiencing the record-high inflation the country saw over the summer, Foy said investors are still experiencing higher-than-normal prices on everyday items.
“I think just in terms of people's lives as consumers as they go out and purchase things, they're still seeing high prices and so it's still something that they're concerned about,” he said.
The study did find that advisors are having a positive impact on investors, as those who work with a financial advisor registered a confidence level of 606, compared with the 555 score those who did not work with an advisor reported. Investors who work with a robo-advisor gave their confidence score as 592, the study said.
The study also found that younger generations, particularly those from Generation Y and millennials, had higher confidence levels than older generations, although confidence levels of all generations dropped in the latest report.
“As the market continued to perform poorly in the second half of the year, a lot of younger people saw confidence levels go down much more rapidly,” Foy said. “So, although as a group they still have slightly higher confidence than boomers the gap that existed six or seven months ago where younger investors were feeling a lot more confident than boomers a lot of that has eroded over the last six months.”