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
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