Retail investors holding on but think the worst is yet to come

Australian retail investors are clinging on to their stocks, but in general are convinced things will get worse before they get better.

Pessimism over the state of global markets peaked three weeks ago but has since retreated slightly, according to survey data from research firm Investment Trends.

While more than 80 per cent of retail investors surveyed say the worst is yet to come, a number are still looking to scoop up Australian stocks.

In the coming fortnight 26 per cent of retail investors surveyed by the research firm said they planned to buy Australian stocks, while 12 per cent said they intended to sell.

Australian investors have been rattled since late February, as the severity of the COVID-19 pandemic unfolded followed by the realisation of the impact it would have on local and global economies.

ASIC and the ASX have had to step in to ensure over-excited companies and those with bad news follow disclosure rules, and to provide some flexibility around raising new money from investors at a time when experts are warning businesses that if they need money in the next 12 months they need to be raising more than they need, now.

And investors have begun worrying over the state of both the economic and company data to come in the next six months and over how long they’ll need to endure the current bear market. 

Fear still in driver seat

The ASX fear index — the VIX, a measure of implied volatility that provides a gauge of expectations of near-term volatility in the Australian sharemarket — has been rolling alongside the S&P500 VIX since February 20.

As US markets have turned positive so has the ASX VIX calmed, down just over 5 per cent by midday at $32.82, helped by government reassurances of financial stimulus and support for businesses and Australians generally.

Investment Trends CEO Mike Blomfield said concerns had shifted from China’s ability to economically weather the COVID-19 pandemic to worries about how the US and Australia will do so, and debt levels in Australia.

“Aussies are worried about the underlying economy more than they are about volatility and near-term returns,” he said in a statement.