FRANKLIN RESOURCES, INC. SAN MATEO, CA--(Marketwired - May 19, 2015) - In its fifth year canvassing investors across the globe, the Franklin Templeton Global Investor Sentiment Survey polled over 11,500 investors in 23 countries across the Americas, Africa, Asia Pacific and Europe. One of the broadest surveys of its kind, respondents shared their views and current attitudes toward investing and their expectations for 2015 and the decade ahead.
"Many markets around the world have enjoyed strong performance over the past several years," said Ed Perks, CIO of Franklin Equity Group. "Investors are optimistic, but that may not be based on a solid understanding of the markets' performance. It's more critical now than ever to really understand the underlying value of individual companies, industries and countries as we are likely to encounter some rough patches ahead."
Investors Anticipate Positive Returns in 2015
More than half (58 percent) of global investors surveyed believe their local stock market will post positive returns in 2015. US investors proved more optimistic, with nearly three-quarters (74 percent) expecting an up market in 2015.
Regionally, North American (US and Canadian) investors (64 percent) are the most optimistic about future local stock market returns, followed by European (62 percent) and Asia Pacific (56 percent) investors. Latin American investors are the least likely to expect positive local stock market performance (46 percent), with the percentage of those in the region who believe the stock market will decline having doubled since last year.
When it comes to perceptions of past performance, the annual survey has shown that investor perception sometimes diverges from reality. This year's survey showed that more than half (55 percent) of investors believe their local stock market was up last year, when in fact only eight (35 percent) of the markets in the 23 countries surveyed experienced positive performance in 2014. In the US, however, most investors' perceptions were on target with 87 percent believing the stock market was up last year, when indeed the S&P 500 Index was up 13.7 percent.1
Stocks Remain in Favor
Stocks continue to top the investors' lists of their most favored asset classes, with 57 percent of global respondents expecting stocks to be among the top three performing asset classes in 2015, followed by real estate (52 percent) and precious metals (39 percent).
US investors are slightly more optimistic about stocks being among the top three performing asset classes this year compared to 2014 (77 percent versus 68 percent), however, optimism for precious metals dropped to 29 percent from 43 percent year over year. Real estate remained the second most favored, with 60 percent of US investors expecting this asset class to be among the top three best performers in 2015.
Taking Risk Into Account
Although global investors view stocks as the asset class with the best return potential, they also view stocks as the riskiest, with 35 percent placing stocks as one of the top three riskiest asset classes, closely followed by the Euro (34 percent) and non-metal commodities (32 percent).
US investors, on the other hand, ranked the Euro as the riskiest asset class for 2015, with 43 percent ranking the asset class in the top three, followed by other currencies (37 percent) and alternatives (36 percent).
Compared to last year, US investors reflected less concern this year about government securities (21 percent selecting it in the top three), the US dollar (19 percent) and corporate bonds (16 percent), compared to last year (32 percent, 30 percent and 21 percent, respectively).
"Views of what constitutes risk vary within the industry, and it's important for investors to have a clear understanding of what risk means to them and how it impacts their portfolios," said Brooks Ritchey, senior managing director and head of portfolio construction, K2 Advisors, and director of investment solutions, Franklin Templeton Solutions. "In today's volatile, low interest rate environment, many investors are looking for actively managed investment solutions from managers employing strategies that can help reduce volatility in unpredictable markets while seeking to provide attractive risk-adjusted returns."
Among global investors, the state of the global economy was most often identified as an investment concern for 2015 (38 percent selected it as a concern), followed by government fiscal policy (32 percent) and the Eurozone debt crisis (32 percent). US investors proved significantly more concerned about the state of the global economy, with 52 percent indicating so. Meanwhile Latin American investors reflected the most concern about government fiscal policy (39 percent) and European investors identified the Eurozone debt crisis as their top concern (48 percent).
Virtually all global (94 percent) and US (96 percent) investors agree that risk management expertise is the most important factor when selecting an investment manager.
Home Country Bias Most Prominent in US
The majority of US investors continue to expect the best equity returns to come from home, both this year and over the next 10 years. In fact, more US investors in this year's survey (74 percent) expressed confidence in US equity returns vs. other markets' returns for the year at hand compared to 64 percent in last year's survey. The number of US investors who think the best fixed income opportunities for the year will be at home is also up significantly this year compared to 2014 (69 percent in 2015 compared to 60 percent in 2014). However, indicating long-term optimism for the global marketplace, home country bias drops among US investors with 60 percent believing the US will have the best equity returns over the next 10 years.
In contrast, more than two-thirds of global investors believe the best equity and fixed income returns will be found outside their home country in 2015 and over the next decade. European investors are least likely to choose their home country as being the best place to invest over the next decade, with only 16 percent indicating so for equity investments and 20 percent for fixed income investments.
"The underlying growth drivers of an individual country inherently influence the way it interacts with the global economy," said Peter Langerman, CEO of Franklin Mutual Series. "The market divergence we are experiencing means that it is becoming increasingly important to be selective when pursuing opportunities in a specific market. I would encourage investors to look beyond the old model of global investing, where the world was simply viewed through the binary lens of 'domestic' and 'foreign' and consider company-specific drivers."
Security, Quality of Life Influence Investing Goals
The vast majority of global investors (81 percent) are optimistic about reaching their financial goals. US investors even more so, with 90 percent of US investors indicating such optimism (up from 84 percent in 2014).
When examining top investment goals, retirement ranked among the top three for 75 percent of US investors, followed by preparation for emergencies (50 percent) and planning a vacation (39 percent). Meanwhile, investors in Latin America are most focused on saving for the purchase of a new home (50 percent) and investing in/starting a business (48 percent), while European investors place the highest priority on planning a vacation (49 percent). Globally, retirement most often ranked among the top three (46 percent).
Methodology
The Franklin Templeton Global Investor Sentiment Survey, conducted by ORC International, included responses from 11,508 individuals in 23 countries: Brazil, Chile and Mexico in Latin America; Australia, China, Hong Kong, India, Japan, Malaysia, South Korea and Singapore in Asia; France, Germany, Greece, Italy, Poland, Spain, Sweden and the UK in Europe; South Africa and the UAE in the Middle East and Africa; and the United States and Canada in North America. Survey respondents were between the ages of 25 and 65 in Latin America, Asia (except for Japan) and South Africa and 25 and older in Europe, Japan, the UAE, Canada and the US. Respondents were required to own investable assets, such as stocks, bonds, mutual funds, etc. In addition, a minimum investable asset threshold was set for each country to ensure that the respondent had sufficient investments, providing a knowledge base from which to answer the survey questions. The survey was completed from February 12 to March 2, 2015, in all countries.
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1. Source: Morningstar. See www.franklintempletondatasources.com for additional data provider information.
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