2014 Global Investor Sentiment Survey K E Y I N S I G H T S - G L O B A L
Our results indicate that by many measures investors are optimistic about the year ahead. Following 2013, a year that saw the global economy grow at its fastest pace in nearly three years, investors show growing optimism about stocks, their investment returns and their ability to reach their financial goals. But this optimism is tempered by a lingering sense of uncertainty, as over 50% of investors indicate they ll follow a more conservative strategy this year. Despite the sense of uncertainty, many investors agree that 2014 will be a positive year for stocks. Last year, soft global growth and a strong U.S. dollar favored U.S. stocks over those in developed and emerging markets. However, in the latter-half of 2013, the dollar weakened and signs of growth outside the U.S. solidified, factors which may be influencing investors positive outlook for stocks. The survey also uncovered that investors continue to acknowledge the value of global diversification and agree the best opportunities can be found by looking outside their home countries. Read on to learn how the world s investors are planning for what s next. 2
Key Insights Investors expect stronger stock market performance in 2014 Despite rising optimism, most investors are reluctant to assume more risk Investors see the most potential in stocks and real estate to provide returns in 2014 Investors expect better returns from their investments in the year ahead Investors believe the best equity and fixed income returns will be found abroad Government fiscal issues among investors top concerns about investing in the U.S. and Europe 3
Investors Expect Better Stock Market Performance in 2014 We asked investors how they believed their local stock market performed over the last year and how they think it ll perform in the year ahead. Looking back on 2013, just 55% of investors believed their local market was up. When considering the performance of the market in 2014, 62% responded with beliefs that the market will be up. As evidenced by the chart below, investors in Latin America are expecting the greatest increase in their local stock markets performance this year, followed by investors in the Asia Pacific region. While nearly 7 in 10 investors in the U.S. and Canada believe 2014 will be a strong year for stocks, this figure is slightly lower than their outlook for 2013, with 74% of investors agreeing that the market produced positive returns. Investors Stock Market Outlook Regional Comparison 49% 58% 59% 64% 53% 65% 74% 69% 30% 21% 25% 1 21% 20% 23% 13% 28% 19% 18% 1 1 22% 9% 9% Asia Pacific 2013 Asia Pacific 2014 Europe 2013 Europe 2014 Latin America 2013 Latin America 2014 Up Flat Down U.S. & Canada 2013 U.S. & Canada 2014 4
Most Investors Are Reluctant to Assume More Risk While fewer investors are planning to follow a more conservative strategy this year, their responses indicate that risk remains a concern. In our 2013 study, we discovered that 5 of investors preferred to take on less risk with the potential of achieving lower returns and that just 31% planned to assume more risk in order to achieve higher returns. This year, 52% of investors indicated that they re planning to become more conservative with their investments, while 32% are planning to follow a more aggressive, or risky, strategy. This trend toward conservatism, though it has declined somewhat year-on-year, runs counter to the fact that most investors expect better stock market performance and higher returns from their investments this year. Investor Strategy Planning Annual Comparison 2013 and 2014 40% 36% 28% 29% 1 12% 16% 15% 3% 4% 2013 2014 Much More Conservative Slightly More Conservative No Change in Strategy Slightly More Aggressive Much More Aggressive 5
Investors Look to Stocks and Real Estate to Provide Returns in 2014 Globally, investors show the greatest interest in stocks and property this year as 55% and 52%, respectively, believe these asset classes will provide the best returns. Among the 22 countries surveyed, investors in Japan showed the strongest conviction for stocks, with 78% agreeing the asset class will outperform in the year ahead. On the opposite end of the spectrum, Greek investors had the least optimistic outlook for stocks, with less than 40% believing the asset class will be among the best investments in 2014. While still among the perceived top-performers for 2014, precious metals have fallen out of favor with many investors, dropping from 53% in 2013 to 39% this year. Investors show a growing interest in the potential of alternatives to deliver returns, as evidenced by the chart below. The number of investors that believe alternatives will provide the best returns has increased by over 73% year-onyear. Perceived Top-Performing Asset Classes Annual Comparison 2013 and 2014 Asset Class 2013 Ranked Top Three 2014 Ranked Top Three Stocks 50% 55% Government securities 23% 21% Corporate bonds 19% 21% Property/real estate 51% 52% Precious metals 53% 39% Non-metal commodities 40% 3 Alternatives 15% 26% Currencies 21% 23% Bank savings/fixed deposits 28% 25% 6
Investors Expect Higher Returns in the Year Ahead In each of the regions surveyed, investors believe their returns will be higher this year than in 2013. With an expected return of nearly 11%, investors in Latin America have the most optimistic outlook for their investments performance this year. Conversely, at under, European investors have the most conservative outlook for their returns this year, though still higher than the 5.9% return they believe they earned in 2013. When looking at the country level, investors in India and Brazil expect the highest returns in the year ahead, at 13.8% and 13.5%, respectively. French investors have the most cautious projections for 2014, as they expect an average return of just 5.4% on their investments this year. Investment Return Projections Annual Comparison 2013 and 2014 8.0% 10.1% 5.9% 6.8% 10.9% 9.0% 8.0% 8.0% Asia Pacific Europe Latin America U.S. & Canada 2013 Estimate 2014 Estimate 7
Investors Believe the Best Equity and Fixed Income Returns Will Be Found Abroad Most investors believe the best equity and fixed income returns can be found outside of their home countries this year. This awareness of global investing opportunities was evidenced in our 2013 survey, where we found that 66% of investors thought the best returns could be found somewhere other than their domestic market. This year, 68% of investors believe the best equity returns can be found abroad, with many (24%) favoring Asia. When considering the best fixed income opportunities, just 31% of investors believe the best returns will be achieved at home. Looking abroad, investors consider the U.S. and Canada and Asia as being among the best regions for fixed income investments in the year ahead. Best Equity Opportunities 6% 4% Home country 32% Western Europe 24% 32% Central and Eastern Europe 6% South and Central America 5% U.S. and Canada 15% Africa 2% 2% Asia (including India) 24% Middle East 6% 15% 5% 6% Australia/New Zealand 4% Best Fixed Income Opportunities 6% 6% Home country 31% Western Europe 10% 31% Central and Eastern Europe 1 South and Central America 5% U.S. and Canada 15% Africa 3% 3% Asia 1 15% 5% 10% Middle East 6% Australia/New Zealand 6% 8
Investors Most Concerned by Government Fiscal Issues in the U.S. and Europe When asked to select their top concerns about investing in the U.S. and Europe this year, most investors cited government fiscal issues as being among their top concerns. When considering Europe, investors selected the Eurozone debt crisis as their top concern, followed by slow economic outlook, general market volatility. When considering the U.S., investors selected large fiscal debt, followed by slow economic outlook and tapering of the Federal Reserve s bond-buying program (QE) as being their top concerns about investing in the States in 2014. Top Concerns About Investing in Europe Eurozone debt crisis Slow economic outlook General market volatility Unstable domestic political environment Low interest rates There are better opportunities elsewhere Inflation concerns Deflation concerns I have no concerns about investing in Europe 30% 12% 10% 35% 11% 34% 9% 2 26% 24% 4% 1 10% 62% 46% Ranked First Ranked Top Three Top Concerns About Investing in the U.S. 0% 20% 40% 60% 80% Large fiscal debt Slow economic outlook Tapering of the Federal Reserve`s bond buying program General market volatility Inflation concerns There are better opportunities elsewhere Unstable domestic political environment 11% 11% 10% 30% 40% 39% 36% 2 26% 24% 60% Ranked First Ranked Top Three I have no concerns about investing in U.S. 16% 0% 20% 40% 60% 80% 9
About the Survey The Franklin Templeton Global Investor Sentiment Survey, conducted by ORC International, included responses from 11,113 individuals in 22 countries: Brazil, Chile and Mexico in Latin America; Australia, China, Hong Kong, India, Japan, Malaysia, South Korea and Singapore in Asia; France, Germany, Italy, Poland, Spain, Sweden, Greece and the U.K. in Europe, South Africa, and the U.S. and Canada in North America. Survey respondents were between the ages of 25 and 65 in Latin America, South Africa and Asia and 25 and older in Europe, Canada and the U.S. Respondents were required to own investible 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 which would provide a knowledge base to answer the survey questions. Surveys were completed from January 2 to 15, 2014, in all countries. 10
Franklin Templeton Investments Gain from Our Perspective At Franklin Templeton Investments, we re dedicated to one goal: delivering exceptional asset management for our shareholders. By bringing together multiple, world-class investment teams in a single firm, we re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world s largest global money managers. This has made us a trusted partner to millions of investors and institutions across the globe. Unwavering Focus on Investment Excellence At the core of our firm you ll find eleven independent investment teams each with a focused area of expertise from traditional to alternative strategies and multi-asset solutions. And because our portfolio groups operate autonomously, their strategies can be combined to deliver true style and asset class diversification. All of our portfolio teams share a common commitment to excellence grounded in rigorous, fundamental research and robust, disciplined risk management. Decade after decade, our consistent, research-driven processes have helped Franklin Templeton earn an impressive record of strong, long-term results. Global Perspective Shaped by Local Insight In today s complex and interconnected world, smart investing demands a global perspective. Franklin Templeton pioneered international investing over sixty years ago, and our expertise in emerging markets spans more than a quarter of a century. Today, we have over 600 investment professionals on the ground in 25 countries, spotting investment ideas and potential risks firsthand. Across the globe, our locally-based portfolio teams bring in-depth understanding of local companies, economies and cultural nuances, and share their best thinking across our global research network. Strength and Experience Franklin Templeton is a global leader with over $886 billion in assets under management serving clients in over 150 countries 1. We run our business with the same prudence we apply to asset management, staying focused on delivering relevant investment solutions, strong long-term results and reliable, personal service. This valuesdriven approach, focused on putting clients first, has helped make Franklin Templeton among the most trusted names in financial services. 1. As of 3/31/13; investors represented by total number of shareholder accounts. 11
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