Despite inflation, many investors are optimistic and confident in their ability to keep up with their finances, according to the latest J.D. Power U.S. Investor Confidence Index.
The index, which tracks U.S. adults with at least $100,000 in investable assets, found that investors are upbeat about their financial outlook, as 29% said they are highly confident in their ability to keep up with inflation. That is up from 24% in the fourth quarter of 2022 and the highest rate of confidence since the second quarter of 2022, the report showed.
The latest report, J.D. Power noted, was fielded in late March through early April and coincided with the Bureau of Labor Statistics report that showed inflation eased from the all-time 9.1% in June 2022 to 5%. But at the same time investors were also faced with a banking crisis where three small- to mid-size U.S. banks collapsed over the course of five days in March.
The report showed investors’ confidence overall jumped 89 points to 590 (on a 1,000-point scale) in the first quarter of 2023, a gain J.D. Power noted was significant in that it recouped of more than half of the drop from the third quarter to the fourth quarter of 2022. Further, 79% of investors said they feel better off or about the same as they did a year ago, and 91% said they plan to maintain or increase their contributions in the next three months.
Two-thirds of investors somewhat agreed or strongly agreed that their concerns about the stability of the financial system heightened during the bank collapses. But 53% of advised investors said they were left to figure things out on their own, as their primary firm did not reach out to them during the crisis.
While investor sentiment is resilient and improving, not receiving meaningful communication from their firm was noteworthy, especially since 71% of investors who heard from their advisors said it made a difference in helping to quell their fears, said Craig Martin, managing director and global head of wealth and lending intelligence at J.D. Power.
“Whether real or perceived this lack of communication is a signal that many retail investors’ relationships with their firms are more transactional in nature. This makes consumers more open and susceptible to competitors acquisition efforts and is particularly problematic in more volatile or down markets,” Martin told Financial Advisor.
The report also found that women investors continue to lag men in confidence index scores. Overall, women scored 567 versus 626 for men in 2022, and that lower confidence continued in the latest quarter (562 vs. 620).
There also was notably generational difference in confidence levels. For the fourth consecutive quarter, Gen Z and millennial investors showed higher levels of confidence at 667 compared to 567 for Gen X and 563 for baby boomers.