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Year-end investor sentiment flattens, matches two-year low

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Year-end investor sentiment flattens, matches two-year low

Fewer feel they are better off financially than they were two years ago.

According to a quarterly survey of affluent investors by financial services giant John Hancock, after reaching a record high in the second quarter of 2015, investor sentiment flattened out in the year's final quarter, matching a low last seen in the third quarter of 2013.

Global equity market volatility and expectations that in December the Federal Reserve would bring an end to an era of historically low interest rates both appear to have tempered investor optimism. As for world issues that most worry investors, just over half of investors (53%) say they are very concerned about unrest in the Middle East. This finding is significantly higher than one year ago when 41% expressed this concern, and is likely due to the recent terror attacks in Paris which occurred while the survey was underway.

"Confidence in investing in stocks has decreased to 49% this quarter from 60% one year ago, and we saw a similar decline in optimism toward investing in balanced mutual funds, which incorporate stocks and bonds, a drop to 52% from 58% one year ago," noted Megan E. Greene, Chief Economist, John Hancock Asset Management. "However, two-thirds of investors are still positive about investing in their own homes, and 56% are positive about real estate investments in general. Another piece of good news is that investors continue to stay the course with retirement savings, with nearly eight in ten investors saying now is a good time to contribute to 401(k) plans and IRAs."

The cost of healthcare continues to lead the list of issues that investors worry about the most. Nearly six in ten (58%) rank this as their chief concern, up from 55% in the third quarter of 2015. Concern about oil and gas prices, which greatly concerned 24% of investors in Q2 of 2015, has declined to 13% of those surveyed.

Investors believe that technology and healthcare companies will provide the best investment opportunities in the next six months. The largest share of investors (20%) think that blue chip stocks will perform the best over the next six months. But in Q4 of last year, 29% felt blue chips were the most promising, which suggests that uncertainty has grown over the past 12 months.

The share of investors who say they are in a better financial position now compared with two years ago (44%) is significantly lower than in Q4 of 2014 when 50% said so, and from 2015's third quarter when the figure was 52%. The share of investors who say they expect to be better off financially two years hence remained the same in Q4 2015 as it was in Q4 of 2014 – 49%.


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