Pulse Data Finds Stakes High if U.S. Defaults

An assortment of United States coins, includin...

(Photo credit: Wikipedia)

Nearly seven in ten “main street” investors had confidence in the U.S. capital markets and a record 79 percent had confidence in investing in U.S. publicly-traded companies just prior to the government shutdown on October 1. This year’s survey marks the seventh consecutive year the CAQ has measured investor confidence in U.S. and global capital markets, audited financial information and investing in U.S. publicly traded companies.

“Weeks before the government closed, investor confidence in U.S. capital markets reached 69 percent, a level not seen since 2009, and confidence in investing in publicly traded companies reached a record high,” said CAQ Executive Director Cindy Fornelli. “Our polling shows a prolonged government shutdown or contentious debt ceiling fight would reverse this trend and shake investor confidence. A default could be devastating.”

Impact of Government Shutdown and Possible U.S. Default

A follow up “pulse” survey to the annual investor survey was conducted to gain a fresh perspective on how a prolonged government shutdown or U.S. default would impact investor confidence. The results, from a poll of 424 average U.S. investors, show that:

  • Today investor confidence in U.S. capital markets is holding steady at 69 percent.
  • The longer the shutdown continues the more confidence will erode – if it lasts another week confidence recedes to 60 percent.
  • Most importantly, investor confidence would plummet to a record low of 39 percent if Congress fails to raise the debt ceiling and the U.S. were to default on its financial obligations.

This new data shows just how high the stakes are for the US and its capital markets if the US defaults. Investor confidence in its capital markets have not fallen below 60 percent even in 2008 at the height of the financial crisis.

Confidence in Audited Financial Information Holding Steady

Other key findings from the survey include the following:

  • Confidence in capital markets outside the United States rebounded back to 2011 levels with a seven percentage point jump to 42 percent.
  • After declining in 2008, confidence in audited financial information released by publicly traded U.S. companies has remained steady over the past four years with just over two-thirds of investors expressing at least some confi­dence. This year saw a slight uptick with just over seven in ten (72%) investors expressing at least some confidence.
  • Since 2011, respondents were asked how much confidence they have in a number of different entities when it comes to effective­ness in looking out for investors’ interests. As in past years, investors express the most confidence in independent auditors (72%), followed by financial advisors and brokers (69%) and independent audit committees (69%). All entities across the spectrum saw an increase in confidence in 2013.

Nonfinancial Factors Key in Investment Decisions

In addition to measuring confidence, the survey also explored the factors that influence investment decisions, including what types of information investors find essential to their decision-making process. It found that investors consider more nonfinancial factors as being essential to their investment decisions than financial factors. Nonfinancial factors viewed as essential by four in ten investors or more include:

  • The sector or industry the company is in;
  • Whether a company has sound corporate governance in place;
  • The company’s key strengths and weaknesses;
  • The strategy for future company growth;
  • The company’s risks and opportunities; and
  • Whether the company is operating in a socially responsible manner and/or an environmentally-friendly fashion.

In terms of where investors source information, the survey found that a majority of investors rely on a financial planner, advisor or broker, and two-thirds consider a company’s financial reports when making investment decisions. However, 34 percent of investors surveyed indicated that they use social media some of the time as a source of information.

From: Center for Audit Quality


Follow the Magazine:
(After you have filled in your email address in the column at the right hand side of the screen, a confirmation email will sent to your email address. You will have to confirm it before subscription begins)

Follow us on Twitter:

Like us on Facebook:

**As part of the Magazine’s drive to reward subscribers/followers, we will be providing subscribers/followers special access to exclusive content which will not be otherwise available to normal visitors. Please be sure to subscribe to the Magazine. Many visitors have given us positive comments that they will be bookmarking the site, but as the system is unable to capture a working email address to which the passcodes for exclusive content will be sent, they will miss out on this content. Do note that passcodes are locked to each exclusive content, not a one-for-all access, so do provide a working email address that you check regularly so as not to miss out on them!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s