Uncertainty surrounding the upcoming presidential election, economic backdrop and interest rate environment has some US investors reducing portfolio risk, according to the 2024 US Investor Survey: Insights for a Brighter Future.
Notably, just 42% of US investors that were surveyed are very satisfied with their current financial situation – down from 48% a year ago, and two-in-three (67%) believe the cost of living is increasing faster than their income
“In times like these, all investors should keep in mind that changes to a portfolio designed to avoid short-term volatility can often jeopardise long-term goals,” said Matt Sommer, Head of Specialist Consulting Group at Janus Henderson Investors.
“The news cycle is moving at an incredible pace and headlines can be unnerving, but US equities have remained remarkedly resilient in the face of elevated levels of uncertainty.”
An election year marked by tumult is clearly weighing on the minds of today’s investors, as 78% of survey respondents are concerned about how the upcoming presidential election may impact their financial situation over the next 12 months, according to the report.
In fact, more respondents are concerned about the election than are worried about persistent inflation (70%), high interest rates (57%), poor stock market performance (57%), or a potential recession (55%).
Longer-term (next 10 years), US investor concerns are related to broader, systemic domestic and global issues such as long-term impact of growing political discord within the US (77%), rising cost of healthcare (67%), the national debt (66%) along with US-China relations (64%)
Equity exposure trimmed whilst active management remains in demand
During the past 12 months, 33% of survey respondents have shifted assets from equities to cash or fixed income investments and nearly as many investors (32%) say they are planning to shift assets from equities to cash or fixed income investments in the next 12 months, the report found,
The primary reasons for shifting or planning to shift out of equities include higher interest rates, acting on a recommendation from their adviser, and feeling safer in cash or fixed income.
While nearly half of all respondents (54%) report they are preparing for a recession, this is down from 65% in 2023.
Amid elevated uncertainty, 43% of US investors who own mutual funds or ETFs say they prefer an equal mix of active and passive funds in their portfolio, 26% favour active managers, 18% passive managers, 10% have no preference and 3% were unsure.
The areas investors believe represent the best investment opportunities over the next few years include technology (73%), healthcare/biotech (62%), and real estate (38%).
AI fraud risk an established threat
Nearly three-in-four US investors (73%) also believe that AI greatly increases the risk of financial exploitation, and 56% are very or somewhat concerned that they or a loved one could fall victim to financial exploitation. Millennials (66%) and members of Generation X (63%) are more likely to be concerned about financial fraud than Baby Boomers (48%) or members of the Silent Generation (43%).
Across all generations, 45% of US investors who use a financial adviser report their adviser has already provided them with resources to help avoid financial fraud, 29% would like their adviser to provide these resources and the remaining 26% say they are not interested in these resources.
“Sentiment surrounding AI isn’t entirely negative. Among those who use a financial adviser or those who would consider hiring one in the next two years, the majority feel good or neutral about their adviser using AI technology to create educational content (85%) or for administrative tasks (83%),” the report highlighted.
“However, over a third (36%) would object to their adviser using AI to make investment recommendations, and an even greater number (44%) would be upset if they learned their adviser used AI to respond to their texts or emails.”
