Natixis survey reveals optimism despite market volatility as well as hard lessons for investors hit by COVID-19 losses
Even as they expect further market volatility, financial professionals expect the stock market will suffer relatively mild losses, according to a new Natixis survey.
In a poll of 2,700 financial professionals around the world conducted between March 16 and April 24, Natixis found consensus forecasts of a 7% loss for the S&P 500 and a 7.3% loss for the MSCI World Index at the end of the year.
Respondents’ 2020 return expectations were closer to 2018 declines than the ones in 2008, which was marked by a 37% plunge in the S&P and a 40.33% loss for the MSCI benchmark.
Focusing on the 300 respondents from the U.S., Natixis said 65% saw volatility as the top risk, with recession fears a close second at 64%. Uncertainty surrounding political events were flagged as a portfolio risk by 43%, while 25% considered the U.S. presidential election to be a factor. Unlike previous surveys, few respondents this year (22%) indicated concern surrounding low yields.
“The dramatic rise in volatility underscores the important role that active managers and financial advisors play in helping their clients navigate uncertainty, capitalize on opportunities, and remain focused on their long-term investment goals during these unprecedented markets,” said David Gunta, Natixis Investment Managers’ CEO for the U.S.
The survey also revealed that an overwhelming majority (92%) though investors had gotten generally complacent about risk because of the prolonged bull market preceding the coronavirus. In line with that, 48% of respondents said that as long as the markets are up, their clients resist portfolio rebalancing.
Other findings also indicate professionals’ misgivings about investors’ readiness prior to the selloff, including:
- 76% of financial professionals thought individual investors were unprepared for a market downturn;
- 79% suspect investors failed to realize that the bull market’s longevity was unprecedented rather than historically normal;
- 85% thought investors generally struggle to understand their own risk tolerance, and 81% said clients only actually recognize risk once it’s been realized.
The coronavirus might have been a disaster for many, in terms of both health and wealth. But at least from a financial perspective, the survey results suggest that investors and advisors can derive valuable takeaways from the pandemic-driven downturn.
“The market downturn – and expected recovery – serves as a lesson in behavioural finance, even if learned the hard way through real losses and missed goals,” said Dave Goodsell, executive director of Natixis’ Center for Investor Insight. “Financial professionals can show their value by talking with clients in real terms about risk and return expectations, helping them build resilient portfolios and how to keep emotions in check during market swings.”
