Investors in the US remain cautious even as the majority of investors around the world have become more confident about investment opportunities, according to a comprehensive report of investor sentiment by Schroders.
Analysis of the Schroders Global Investment Trends Report 20141, a survey of 15,749 investors across 23 countries (including 2,006 investors in the US), reveals that more than half of global investors (56%) have an optimistic outlook on investments in 2014, up from 48% in 2013.
However, only 37% of U.S. investors feel more confident about investment opportunities this year, down from 59% last year; they cited fears of higher taxes (33%), a weak or prolonged global economic recovery (33%) and rising inflation (24%) as the reasons for their erosion of confidence.
The increase in global investor confidence has led investors to return to the equity markets, and the survey found many are looking beyond their own countries to find investment opportunities with the strongest returns.
Among global investors, 70% believe equities will deliver the best returns, but only 41% believe equities in their own nations would yield the greatest returns, compared to 50% in 2013. Almost one-third (31%) of global investors expect North American investments to provide the highest returns, and 27% and 12% of investors expect Western Europe and the Middle East, respectively, to deliver the strongest returns in 2014.
Although many investors around the world are looking outside their national and regional borders to find the best investment opportunities, the study found that 70% of U.S. investors believe North America will provide the top-performing investments — and 56% believe U.S. equities will likely generate the best returns, while 22% plan to invest in multi-asset funds (diversified portfolios composed of equity, fixed income and alternative investments). Emerging market equities were ranked as the third most popular type of equity investment among U.S. investors, with 15% stating these securities would likely deliver the highest returns and 14% placing their confidence in global equities.
Massimo Tosato, executive vice chairman, Schroders plc said: "This report shows encouraging signs of renewed confidence in equity markets, driven in part by improving economic and market performance in developed economies. In 2013, the U.S. economy delivered Q4 growth of around 3% despite the Federal Government shut-down in October. In Europe, Germany and the U.K. have performed well. Equally, Japan has delivered some of the best results of any global economy following Abenomics policies, giving renewed hope to investors across the globe.
"However, this trend towards equity investments is not without challenges in 2014. Despite positive news from some countries, global GDP growth remains lower than expected, when compared to recovery rates from previous recessions. This growth will not be uniform across sectors, economies or regions, particularly given that significant weakness remains in some Eurozone countries, and also in emerging markets where the withdrawal of QE is weighing heavily on stock markets. We are in a still transitioning global economy and taking an active investment approach remains key for investors."
The report also found that U.S. investors have longer investment horizons than investors in other countries, and the U.S. investor base has a stronger recognition of the importance of saving for pensions and retirement than the global investment community.
Almost half (46%) of global investors revealed that saving for pensions and retirement planning is their major objective for 2014, but only 5% are considering a 10-year time horizon for returns, while 61% have an investment horizon of one to five years.
Meanwhile, in the U.S., 67% of investors listed pension/retirement saving as a key goal, and the average time horizon for investors is six years — the longest in any of the 23 countries represented in the survey.
Carter Sims, head of US Intermediary Distribution, Schroders, said: "Our report demonstrates that while European and Asian investors have renewed confidence in the equity markets, US investors are a bit more cautious. The fears over the impact of QE tapering and the fact that 2013 saw resurgent US Stock market growth and economic recovery have played a role in that shift of confidence. Seeking professional financial advice should be a focus for investors as they look to move into new areas and benefit from global growth and opportunities."