Investors are more pessimistic about the current share market outlook than financial advisers, although both have growing expectations of a bear market, according to the latest combinedAustralian Investors Association(AIA) and Advisor Ratings sentiment indices.
The October 2002 figures show that 35.2 per cent of investors are expecting a bear market compared with only 11.8 per cent of advisers, with 32.4 per cent of advisors remaining bullish in contrast to 17.1 per cent of investors.
The chief executive of Advisor Ratings, David Child, speculates that differences in investor and advisor outlook are linked to their different information sources and influences.
“Advisors are subject to information produced by institutions with investment products, which have no advantage in talking down the market,” Child says.
“Investors’ major source of information is the newspapers, which tend to concentrate on the gloomier side of things.”
“From an adviser’s point of view, it is much more difficult to operate in a negative environment – if they were to take a bearish view then they would have to do something about it.”
The figures reveal that expectations of poor market performance are rising, with the number of investors holding a bearish position increasing by 18.8 per cent in the past month.
Advisers are also showing nervousness about the direction of the market, with bullish advisers reducing by one third, from 47.1 per cent down to 32.4 per cent.
The AIA says the striking thing about the results are that asset allocations have remained relatively unchanged despite market sentiment.
“People are starting to feel more bearish about it, but they haven’t been prepared to put their money where their brain is,” AIA president Bob Andrew says.
Child suggests that both investors and advisers are taking a longer-term view of market performance, overcoming short-term fears.
“People are showing that whatever the investment climate may be, they will still allocate in a similar way for the long term,” Child says.
