Self-Directed Investors Stay the Course, Eye Future Market Rebound

Rising inflation and stock market volatility are weighing heavily on self-directed investors, but few have moved money out of stocks or bonds, and instead appear to be tightening their budgets.

This is according to findings from Janus Henderson Investors’ 2022 Retirement Confidence Report, which shows that 86% of survey respondents are concerned or very concerned about inflation and 79% are concerned or very concerned about the stock market.

Diving deeper into the results, women reported greater concern about the stock market than men, although no gender-based difference was found in responses regarding inflation, the report notes. Another key finding was that investors still in the workforce were more worried about the stock market and inflation compared to retirees, perhaps because of the many uncertainties associated with how their household budgets will change in retirement.

Despite these concerns, just 13% of investors have moved money out of stocks or bonds and into cash. Instead, nearly half (49%) of respondents said they have reduced their spending or plan to reduce spending as a result of the financial markets and rising inflation. 

The survey, which seeks to better understand how self-directed investors are coping with this year’s challenging market environment, also shows that 45% of investors said they felt “less confident” in their ability to have enough money to live comfortably throughout retirement.

While retirement confidence has suffered, it has not collapsed entirely, as slightly more than half of investors reported no change in their confidence levels despite the recent stock market performance and inflationary environment. At the same time, however, almost half of investors may be feeling unnerved, the report notes.  

“With both stocks and bonds posting three consecutive quarters of negative returns in 2022, investor confidence has suffered, but it hasn’t collapsed,” observes Matt Sommer, Head of Janus Henderson Investors’ Defined Contribution and Wealth Advisor Services Team. “The Covid-19 stock selloff and quick comeback that occurred in 2020 put a spotlight on the challenges of timing the markets and remains a vivid example of the importance of creating and sticking to a plan in all types of markets.”

Investors Eye Market Rebound

Meanwhile, expectations for better days ahead might help explain why more investors have not moved to cash. According to the findings, the majority of respondents (60%) believe the S&P 500 Index will be higher one year from now, while 26% believe it will be lower and 14% expect it will be relatively unchanged.
Investors also have a strong desire for dividends. Janus Henderson found that the preferred investments for generating income in retirement in the current environment include dividend-paying stocks (65%), annuities (24%), taxable bonds (23%) and tax-free bonds (23%).

The survey was conducted in October 2022 and was distributed within the firm’s Direct Business Channel (DBC) to a randomly selected group of investors age 50 and older who were the sole or shared financial decision-maker for their households (1,926 investors completed the survey). The DBC caters to self-directed U.S. investors who have established accounts directly with Janus Henderson and without the assistance of a financial professional, some of whom may consult with an advisor for other aspects of their wealth.