Australian investors have a negative outlook on shares for the first time since the GFC

Szili Krisztin / EyeEm /Getty
  • Australian investors now believe they are in a bear market.
  • The October 2018 Investor Intentions Index has gone negative for the first time since the GFC.
  • Research firm Investment Trends says investors now see the domestic share market lower in 12 months.

Expectations by Australian investors for share market returns have turned negative for the first time since the GFC.

The October 2018 Investor Intentions Index, a monthly study by research firm Investment Trends which tracks investor market outlook and intended investments, fell sharply.

Australian retail investors now see only negative returns over the next 12 months, the first time return expectations have gone negative since Investment Trends began tracking in 2009.

In October, the average capital gain expectation of investors fell to -1%, down from +1.2% in September and +4.7% in January, as this chart shows:

Investment Trends

The Investment Trends study — where investors are asked what return they expect from the Australian share market, excluding dividends, over the next 12 months — draws on monthly surveys answered by 2095 Australian investors over the last 12 months.

The ASX200 has dropped about 6% since the start of the new financial year in July, following a wave of selling sparked by falls on Wall Street.

“Investors now believe we’re in a bear market, on average expecting domestic markets will be lower in 12 months’ time than where they are today,” says Recep Peker, Research Director at Investment Trends.

“While recent volatility has played a hand in driving this pessimism, investors are more concerned about major global issues.”

Peker says investors were becoming increasingly desensitised to both market volatility and global events throughout 2017.

When asked to rate their level of concern with the situation in the world’s financial markets, in February 2018 the average investor was the least concerned since the GFC.

The picture is very different in October 2018, with concern levels reaching a 22 month high.

When asked what they are most worried about, only 27% cite the recent share market volatility – the sixth-most cited reason.

Geopolitical events are casting a darker shadow over investors’ outlook than domestic issues, with investors most concerned about the current White House administration (46%); tension between the world’s major economies (40%); global debt levels (33%) and a China slowdown (32%).

“Whether directly or indirectly, Australians are concerned about the economic outcomes of the current White House administration and the trade policies being implemented both by the US and in response to them,” says Peker.

“With capital gain expectations for the Australian stock market turning negative at the same time that the local property market has cooled, financial services firms of all kinds will need to work hard to convince Australians to stay invested through the current cycle.”

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