European investors bullish on equities
Global investors are more optimistic about prospects for 2014, but reluctant to take on more risk in their portfolios, according to the 2014 Franklin Templeton Global Investor Sentiment Survey.
One of the largest of its kind, the survey polled 11,113 investors in 22 countries across Africa, Asia Pacific, the Americas and Europe on their current attitudes towards investing and their expectations for 2014 and the decade ahead.
European investors concur in their expectations that equities will be the best performing asset class in 2014, although UK investors expect property to perform slightly better than equities.
German, French, Spanish and Swedish investors think equities will also be the best performing asset class over the next 10 years, whereas Italian and UK investors think alternatives and property respectively will be the best performing asset class over the next 10 years.
Expectations for precious metals fell in Germany, Italy, Spain, France and UK when compared to 2013 figures, whereas expectations for equities rose year on year in all five countries.
German, Spanish and Swedish investors think the best equity opportunities are in their home markets this year and in Asia over the long term. Conversely, investors in the UK, Italy and France think the best equity opportunities will be in Asia both this year and over the long term. Amongst European countries, French and Italian investors are the least optimistic about equity opportunities in their own market, both in 2014 and over the next 10 years. Globally, South Africa and Italy are the least optimistic.
The expectations for fixed income returns are varied. Polish, German and Swedish investors think the best fixed income opportunities are in their home market in 2014 and over the next 10 years. Spanish investors think the best fixed income opportunities are in their home markets in 2014 and in Asia over the next 10 years. French investors think Asia offers the best fixed income opportunities both in 2014 and over the long term. Italian investors think Italy, Western Europe and the US/Canada will offer the best fixed income returns in 2014, but that Asia will produce the best opportunities over the next 10 years. Of the 22 countries surveyed, Greek investors were the least optimistic about fixed income opportunities in their own market, both in 2014 and over the next 10 years, followed by Italian and French investors respectively.
In keeping with global findings, European investors have a positive outlook towards stock market performance for 2014. Compared to last year, a greater number of investors in Germany, Spain, Italy, UK and France think the stock market will increase in 2014. Yet, despite their positive outlook, most European investors remain conservative, with the majority of investors planning to adopt a more conservative investment strategy rather than a more aggressive one in 2014. Although the majority of investors still plan to adopt a more conservative strategy, the numbers have decreased since 2013, from 68 per cent to 56 per cent in France, from 67 per cent to 60 per cent in Italy, from 64 per cent to 54 per cent in Spain, from 47 per cent to 38 per cent in the UK and from 59 per cent to 49 per cent in Germany.
Swedish investors are the second most optimistic in Europe about reaching their financial goals with 83 per cent very optimistic or optimistic, followed by Germany (80 per cent) then the UK (75 per cent). Polish investors are the most optimistic, at 85 per cent. Over two-thirds of Italian investors are very optimistic or optimistic (70 per cent). In Spain, the level of optimism is up from 57 per cent in 2013 to 67 per cent in 2014. French investors are the least optimistic about reaching their financial goals of all 22 countries in the survey with only 60 per cent very optimistic or optimistic.
European investors’ top concerns about investing in Europe in 2014 include the Eurozone debt crisis, low interest rates, and unstable domestic political outlook. Their top concerns about investing in the US this year include large fiscal debt, general market volatility and tapering of the Fed’s bond buying programme.
Home country equities are the asset class most likely to be increased / added to the portfolios of Spanish and Swedish investors in 2014. For German, UK and French investors, the asset class most likely to be added is real estate. Italian investors stand out as most likely to increase investments in emerging market bonds and equities.
Jamie Hammond, managing director, Europe at Franklin Templeton Investments, says: “Investors in Europe have a positive stock market performance outlook for 2014. We think their renewed enthusiasm for stocks is encouraging, as many investors will need the higher potential returns stocks have historically provided over the long term in order to reach their financial goals. We are also pleased to see that fewer European investors are adopting conservative investment strategies versus last year. In the long term, the greatest risk investors run is remaining too risk-averse for too long. A smart approach to managing investment risk is not to categorically avoid risks but to ensure that risks taken are intended, understood and appropriately compensated with an eye on achieving longer-term investment goals.”
Five years after the onset of the 2008-2009 market downturn investors continue to show signs of risk aversion, despite an optimistic outlook for the future. Globally, 52 per cent of investors are planning to become more conservative with their strategies this year, taking on less risk with the potential of earning lower returns. However, this risk aversion is less pronounced than last year when the annual survey showed that 57 per cent of investors planned to be more conservative with their investments.
This trend towards conservatism runs counter to the fact that most investors expect better stock market performance and higher returns from their investments this year, as well as the fact that four out of five investors feel optimistic about reaching their financial goals.
- By Category
- News from other sites
- Special Reports
- Partner events