As someone who has canvassed the view that the stock market sell off was over-the-top, the fact our market is now out of bear territory is satisfying. But I’m even more knocked out by the fact that investors haven’t been petrified by the Coronavirus, with our latest Switzer Fear, Greed & Hope survey showing that they’ve seen substantial buying opportunities.
This might surprise you but the survey found that not only do investors prefer stocks over property, the blue chip companies they want to own are the ‘millionaires factory’ Macquarie Bank and CSL, the former government-owned Commonwealth Serum Laboratory!
This shouldn’t really be surprising as both these companies are world class and serious export-income earners. But it indicates that so-called ‘mums and dads’ or retail investors are becoming more sophisticated analysts of the share market.
Our initial survey was released in February and 30% of investors then thought the stock market might rise by 1% to 5% this year but our May survey reveals that number has been halved. In February, only 6% expected an 11% plus rise for stocks. In our latest survey, that number has grown to 13%. And approximately 63% of investors think that the time to invest in stocks is now. And while 26% think another crash will happen this year, 41% think the next market collapse will be 2025 or beyond!
Even though Aussies are often portrayed as addicted to property, the Coronavirus crash has seen 63% of those investors surveyed prefer stocks, while only 10% think bricks and mortar looks attractive! And those so worried that they only want to invest in government-guaranteed bank term deposits numbered 10%, which suggests 90% aren’t spooked by the Coronavirus economic threats.
On property, our survey found 54% of respondents think property prices will fall. That compares to approximately 66% who think share prices are on the way up.
Aside from the top two i.e. CSL and Macquarie, BHP and CBA came in third and fourth place.
There are many interesting insights from this survey of almost 3,000 respondents but what I’m taken by is how retail investors have piled into top quality companies, while a number of my very experienced fund manager buddies have held cash in pretty big percentages, expecting another leg down for stocks.
Don’t get me wrong, they could be right. But I suspect the combination of online trading and the escalation of financial education, especially around stock market trading, have created a smarter group of retail investors who might have ‘eaten the lunch’ of the smarties who run funds.
You see, retail investors in the past have been caught out rushing back to stocks after a crash and have lost money when a second-leg down came around. This has often been seen as novice investors becoming victims of a sucker’s rally.
Like me, many long-term investors could cope with another leg down and would be prepared to buy again at low prices because they have a competitive advantage over fund managers. And what’s that?
Long-term investors don’t have to impress their clients each quarter and can play the long game, like those wise investors who bought CBA in the GFC at $27 and last year received a dividend of 17% plus because they bought when most people were fearful.
It’s the reopening of the economy and the surprise revelation that only 3 million not 6 million people needed JobKeeper that has raised hopes that the economy and therefore company profits won’t be as badly hit as we once expected.
It’s why I suggested on Monday in the Switzer Report that bank stocks looked like a good investment for the long-term player. The likes of Westpac is up 8% this week and overnight in the US, Goldman Sachs is up 16%. This augurs well for our bank stocks again today.
This great move up for stocks out of the bear market is a welcome trend that tells us that there’s an expectation that our economic future is looking miles better today than it did one, two and six weeks ago. It probably partly explains why the PM’s approval has gone up from 60% in our February survey to 88% in this recent one.
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