by - Investors should consider moving cash into the market right now, according to Vanguard’s global head of investor research and policy.
- Retail investors are trading less, suggesting a “stay the course” attitude and a more positive economic outlook, explained Fiona Greig.
- In her view, investors can capitalize on the current landscape by increasing the savings rate and leaning more into employer-sponsored retirement accounts.
Investors are increasingly holding their positions in the market despite volatility, suggesting optimism for the broader economic outlook, according to Vanguard’s global head of investor research and policy, Fiona Greig.
There has been lower retail activity recently and that willingness to maintain positions suggests a more bullish view of stocks, she told Insider in an interview.
“Yes, there has been volatility, but the long-term outlook [investors] have because the stock market is stable,” Greig said. “So unless they have a particular need to liquidate or pull out, investors are really staying the course, and I think that’s good news.”
In a Thursday note from Vanguard detailing trends in investor behavior, data showed investors in December expected stock returns over the next 12 months of 2.7%, up from a five-year low of 0.6% in October, but still more pessimistic than a year ago.
And investors’ expectations for returns over the next 10 years have been relatively stable, falling to 7% last month from 7.2% in October, reinforcing Greig’s view that short-term market jitters have not yet deterred the majority of investors. The figures show that there is still a buy-and-hold environment.
Investors have become slightly less anxious about short-term equity returns, from December 2022.
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“One way to read this is that rate hikes are priced in,” Greig said. “Look at December’s rate hike, it was a non-event in the markets. That suggests to me that the markets are expecting a moderation strategy for the Fed. There are some lower expectations for stock market returns in the near term, but we see pretty clear expectations and optimism for returns in the run of the next 12 months, and even 10 years.”
Increase the savings rates for 2023
Climbing optimism indicates that it may be a good time to consider moving cash into markets, which can be done with minimal risk and at a low cost, according to Greig. She said that right now there is an opportunity to increase your savings rate and increase your allocation of funds.
“I would make sure to take advantage of employer-sponsored retirement plans right now,” she said.
The investment strategist added that it is important not to let volatility scare you into changing your strategy or exiting positions. Choppiness should be expected after a brutal year like 2022, she explained, and the ongoing debt ceiling could lead to further uncertainty.
“Stay the course,” Greig said. “Don’t let volatility and short-term swings make you pull out unnecessarily.”
