Investment Trends' monthly Investor Intentions Index from October shows improvements in consumers' fear levels, but their long-term market return expectations remained depressed.
According to the report, investors expect the market to grow by only 18 per cent in the next five years, which equates to a little over 3 per cent annualised growth.
"This is showing that investors have become desensitised towards all the volatility and bad news; they are used to things like fiscal cliffs and debt crises, and now see these as part of the norm," Peker said.
"One consequence arising from this is that lower concern levels have not translated to better return expectations, which makes the life of everyone in the wealth management industry that much harder, especially for those who have transactional relationships, but also provides opportunities for those who take a more holistic approach to managing their clients' wealth."
Interestingly, investors have started to see more value in small cap stocks and bluechip stocks, but have lately labelled US stocks as overvalued, while seeing resource stocks to be at fair value. Despite recent reductions in official cash rates, the propensity to hold and accumulate cash remains high.