U.S. investors anticipate the protracted bull market to reverse course sometime this year, but aren't getting too worked up about it, a third-quarter telephone survey by Wells Fargo/Gallup found.
Indeed, the poll found investors fairly comfortable with the market as it lingers near historic highs. Sixty-one percent said it was a good time to invest, and only 15% agreed that "fear of a market correction is making your life stressful."
One less blasé expert recently admitted to being very worried about the market.
The findings were part of the Wells Fargo/Gallup Investor and Retirement Optimism Index, which included 1,006 investors 18 and older. The American investor was defined as an adult in a household with total savings and investments of $10,000 or more. (About two in five U.S. households have at least $10,000 in savings and investments.) Of total respondents, 41% reported annual incomes of less than $90,000; 59% reported $90,000 or more.
Fifty-four percent of U.S. investors in the survey anticipated a market correction later in the year, down from 62% of respondents who worried about such a correction in 2013 and 58% in 2014, the previous high points.
A poll of fund managers in August showed the largest monthly increase in 14 months of investors taking out protection against a correction in equity markets.
Wells Fargo/Gallup found that concern about a market correction was not prompting most investors to proactively shield their portfolio, as only 48% said they were consulting with a financial advisor and 40% were rebalancing their portfolio in anticipation of a correction.
A mere 18% said they were selling stocks to help protect from future losses, and 20% were buying bonds to help reduce their exposure to market risk.
"One of the consequences of a protracted bull market is, unfortunately, investor complacency," Heather Hunt-Ruddy, head of client experience and growth at Wells Fargo Advisors, said in a statement.
"With a market correction inevitable at some point, it's important for investors to check their confidence with a comprehensive risk assessment to determine how a market correction could affect their overall investment strategies."
How to explain investor complacency? For one thing, only 36% of investors in the survey said they had heard a lot or moderate amount about a possible correction in the news. Nearly two-thirds said they had heard little or nothing.
Beyond that, many investors appeared to have put the effects of the recession behind them. Only 26% of those polled said they had not financially recovered from the recession, down from 37% in February 2016.
Likewise, 43% said they knew someone besides themselves whose financial situation had not recovered, way down from 70% in the earlier survey.
A recent Wells Fargo study found that 20% of millennials were not invested in the stock market and did not plan to be.
Widespread Correction Pain
How would a possible market correction affect investors in the survey?
Thirteen percent said their financial situation would be hurt a lot by a downturn, and 43% said it would suffer a moderate amount.
The overall percentage of respondents who said they would suffer financially included 60% of high-asset investors, those with $100,000 or more in investments, and 48% of lower asset investors.
At the same time, 32% strongly agreed that they were prepared for a market correction, while another 48% somewhat agreed that they were prepared. One in five respondents said they were not prepared.
As in past surveys, according to Wells Fargo, a majority of investors said they would opt to ride out a market correction, while just 9% said they would exit the market.
Twenty-seven percent said they would view a correction as a buying opportunity, the highest percent ever recorded for this trend, the statement said.
"It's noteworthy that investors say that their financial situation would be hurt by a market correction and yet they're still not highly prepared," Hunt-Ruddy said.
"This underscores the need for professional financial advice or, at the least, a written investment plan and regular rebalancing of one's portfolio."
'Good Listener' vs. 'Snoozer'
Pollsters asked investor participants which one of four investing styles most closely matched their own. Fifty-five percent of investors — regardless of gender, age, retirement status or investment class — claimed to be a "good listener," defined as one who knows where to get sound advice and usually follows it.
