Investor confidence sinks for second consecutive quarter, but 91% plan to maintain or increase investment
The J.D. Power U.S. Investor Confidence Index tracks investor sentiment among U.S. consumers aged 18 and older with at least $100,000 in investable assets.
Great opportunity often arises in turbulent times, which may explain why, despite individual investor confidence declining for a second consecutive quarter, fewer than one-in-ten investors (9%) are planning to decrease investment in 2023.
According to the J.D. Power U.S. Investor Confidence Index, which tracks investor sentiment among U.S. consumers aged 18 and older with at least $100,000 in investable assets, investor confidence has fallen 15 points to 581 (on a 1,000-point scale) in Q4 2022. While that drop is noteworthy, it is significantly smaller than the 36-point drop we observed in Q3 from Q2. That slowing trend, combined with the 91% of investors who say they plan to maintain or increase their current investments, could suggest some optimism bubbling beneath the surface, or at least a lack of panic about where markets are heading.
Inflation Remains a Factor
Once again, the biggest single factor contributing to the quarterly decline in investor confidence is growing concern with the ability to keep up with inflation. Among all eight key drivers of investor confidence, the ability for investors to keep up with inflation is the area of lowest confidence among all segments, regardless of age, affluence, gender or whether or not they are self-directed or work with an advisor. Overall, just 24% say they are highly confident in their ability to keep up with inflation, down from 27% in Q3.
Female investors have significantly lower Investor Confidence Index scores than men (547 vs. 605, respectively). Also, for a third consecutive quarter, younger investors in the Generation Z[1] and Millennial segments show notably higher levels of confidence than members of Generation X and Boomers. Boomers, however, express a slight increase to Q3 (569) from Q2 (567).
The Human Touch
Both overall confidence levels and key drivers of overall confidence vary significantly between investors who work with a financial advisor and those who do not. Human-advised investors have higher overall confidence (606) vs. Non-Advised (555) or Robo-Advised (592).
That trend stays consistent across every factor in the Index. The three areas in which human-advised investors express more confidence than self-directed investors are the perceived ability to keep up with inflation, pay for current or future healthcare expenses, and leaving money to heirs.
The Bubbling Optimism
Despite the challenging environment, most investors remain optimistic about their personal financial situation. Nearly three-fourths (73%) of investors feel better off or the same about where they are financially vs. a year ago, and 91% of investors plan to maintain or increase their contributions in the next three months.
While investors view their personal finance outlook more favorably than the economy, there have been small increases in both metrics between Q3 and Q4, indicating that broad based economic sentiment may slowly be starting to shift direction.
The Next Chapter
While there is undoubtedly still concern that turbulent economic conditions will linger into 2023—and investors are clearly concerned about it—the majority of U.S. wealth management clients are planning to stay the course. There is still a long way to go but, based on the data in our Investor Confidence Index, the investor outlook for 2023 may end up being less about panic and more about finding opportunities for strategic growth.
Methodology
This Wealth Intelligence Report is based on responses from 1,919 U.S. consumers aged 18 and older with at least $100,000 in investable assets. It was fielded from December 19, 2022-January 6, 2023. It was authored by Michael Foy, senior director of wealth intelligence at J.D. Power. Please contact us at the numbers below to connect with Mr. Foy or to learn more about the underlying research.
[1] J.D. Power defines generational groups as Pre-Boomers (born before 1946); Boomers (1946-1964); Gen X (1965-1976); Gen Y (1977-1994); and Gen Z (1995-2004). Millennials (1982-1994) are a subset of Gen Y.
