Investor attitudes rally even as market volatility returns
The Bank of Ireland/ESRI Savings and Investments Index remained unchanged at 102 in February 2018. The Savings Index was unchanged at 103 in February but the Investment Index surprisingly nudged higher to 101 against the backdrop of the first correction in global stock markets in two years.
The monthly Investment Index surprisingly nudged higher to 101 in February, despite the sharp rise in investment market uncertainty in the month. Global stock markets fell almost 10% from their January peak during February due to concerns about rising inflation, a theme which has also destabilised bond markets since the beginning of the year. February’s fall in the Investment Environment Index from 105 to 98 reflected this heightened uncertainty as the proportion of people who thought it was a good time to invest fell to 32%, down from 39% the previous month.
Despite February’s market declines, attitudes towards investment actually improved in the month with the Investment Attitudes Index increasing to 104 from 95 in January. 36% of people said they were regularly investing in February – this is the strongest response since the index began in October 2017 and a big increase on the 30% of people who said they were investing in January.
The Savings Index remained unchanged in February at 103 with a small improvement in attitudes towards saving being offset by a small decline in sentiment towards the savings environment. The savings index has been stable for the past few months having enjoyed a consistent improvement through 2017.
The February data showed that half (49%) of people were regularly saving. The proportion of people saving as much or more than they should also increased to 54%, reversing the four percentage point decline in January. So it appears that savers are now more satisfied with the amounts they are saving.
Save or invest €10K?
This Risk Barometer question asks people how they would consider using a windfall gain of €10,000. The February survey still indicates that Irish people retain a heavy preference for saving with 76% saying they would consider saving such a windfall. Over one third (34%) said they would consider investing some or all of the windfall with pension funds very much seen as peoples’ preferred investment vehicle.
Commenting on the Bank of Ireland Savings and investments Index, Tom McCabe, Bank of Ireland Investment Markets said: “Despite the Savings and Investment Index showing no change in February, the Investment Index results were intriguing as they gave us the first insight into how Irish investors react to stock market volatility.
“The results were surprising as one would normally expect investment attitudes to weaken in the face of falling stock markets. The fact that the data still indicate we’re a nation of savers rather than investors could suggest that Irish people are less exposed to stock market volatility than in other countries and consequently don’t react as much to such periods.
“It will be fascinating to see if this investor resilience persists next month, particularly in light of growing concerns about trade wars which could keep markets on edge in the short term.”
About the ESRI/Bank of Ireland Savings and Investments Index:
The Bank of Ireland/ESRI Savings and Investment Index tracks household attitudes towards savings and investment as well as monitoring their perspectives on the current and future savings and investment environment. Understanding savings behaviour provides insight into how households smooth consumption, plan to make big purchases and build up buffers which can be drawn down in times of economic stress. Monitoring household investment patterns gives an understanding of how they are putting their money to work, their financial diversification, and their appetite for risk. The Bank of Ireland/ESRI Savings and Investment Index also provides a Risk Barometer and a Retirement Optimism Index to give insight into household risk taking and retirement planning. These will be presented on alternate months.
The Bank of Ireland Savings and Investment Index is produced monthly from a minimum sample of 800 consumers aged 15 years and above. The ESRI carries out the Savings and Investment Index research to ensure the indices represent a national sample.
The ESRI works towards a national vision of ‘Informed policy for a better Ireland’. This means producing high-quality analysis to provide robust evidence for policymaking, with the goals of research excellence and policy impact.
The ESRI produces research that contributes to understanding economic and social change in the new international context and that informs public policymaking and civil society in Ireland.