Investor confidence in U.S. capital markets declined significantly for the second-straight year among Americans, according to a newly released survey.
The results found that only 61% of respondents have at least “some” confidence in the U.S. capital markets, compared with 68% in 2010 and 73% in 2009. The winnowing confidence, which topped out at 84% in the survey’s first year of 2007, coincides with record-setting federal deficits that have grown substantially in recent years.
The poll found that the least confident investors are those who have less than $100,000 invested in stocks, bonds or funds, with 57% expressing “little or no confidence,” compared with 70% of those with investments of at least $100,000. The survey, commissioned annually by the Washington, D.C.-based Center for Audit Quality, an affiliate of the American Institute of Certified Public Accountants, also addressed current events in finance and economics that relate to investors’ perceptions and behaviors.
Those who voiced little or no confidence in U.S. capital markets cited the economic crisis/recession in general, 26%, and too much government spending/interference, 18%, weak government oversight of the capital markets, 12%, and volatility in the U.S. stock market, 9%.
The poll also showed reduced investor confidence in capital markets outside of the United States for each of the past five years. Those with at least “some” confidence in non-U.S. capital markets in the latest survey totaled 43%, down from 47% in 2010 and 57% in 2009. Indeed, confidence in capital markets outside the United States has fallen 22 percentage points from a high of 65% in 2007, when the annual survey began.
In addition, the survey found that 42% of the investors expressed “no confidence” in markets outside of the United States, compared with 43% who indicated at least “some” confidence. The top two reasons for little or no confidence in non-U.S. markets stemmed from debt problems and a bad economic climate worldwide, 23%, as well as the debt crisis and problems in Europe, and Greece specifically, 11%.
With more than four out of 10 American investors not having at least “some” confidence in non-U.S. capital markets, it might not be surprising that 44% reported that they do not have any foreign investments. Investors who put at least $100,000 into stocks, bonds, funds or individual savings accounts were more likely to invest internationally, 49%, compared with 28% for those who invested less than $100,000.
When asked which financial concerns keep them awake at night, the respondents replied: not having enough money for retirement, 59%; inability to pay for health care if you or a family member is seriously ill or injured, 54%; fear of maintaining your standard of living, 47%; unemployment, 46%; and worries about paying monthly bills, 32%. Additional concerns shared by the participants included: the availability of credit, 28%; not being able to pay for your children’s education, 25%; and not being able to pay your mortgage or rent, 22%.
This year’s survey featured 1,003 investors, aged 18 and up, who had at least $10,000 invested in stocks, bonds, funds or an individual retirement account and gave telephone interviews Sept. 6 to 14. The respondents needed to be the primary investment decision maker for savings and investment in their household or share that role equally with someone else. The survey’s sample size provides 95% certainty, with a margin of error of +/- 3%, that the same results would be found if all U.S. investors had been polled.
The weakening investor confidence dovetails with the August 2011 findings of the U.S. Congressional Budget Office (CBO) that the United States is facing “profound budgetary and economic challenges” that include a projected $1.3 trillion budget deficit for fiscal 2011. That deficit will be the third-largest U.S. government shortfall in the past 65 years, and is only exceeded by the deficits of the preceding two years, the CBO reported.
People are much more at the “mercy of the market” now that an increasing number of Americans are not eligible to receive pensions and face the need to fund their own retirements, said Joshua Gotbaum, director of the Pension Benefit Guaranty Corporation. Gotbaum, who spoke as part of a panel discussion organized by Atlantic Monthly magazine after the release of the survey, said that the income of roughly 90% of Americans is flat, when factoring in inflation, and there is “no doubt” that Americans are hurting financially.