Investor Sentiment Index reflects strong interest in fixed income, cash and real estate
WATERLOO, ON, Oct. 16, 2002 – Seven out of 10 Canadians say they are holding steady with their investment strategies in the midst of recent market turmoil, according to a national poll conducted for Manulife Financial, among Canada’s leading insurance and wealth management companies.
The 15th regular quarterly poll for Manulife, conducted in late September and early October, also found almost a third of Canadians surveyed say they are still on track with their investment goals. Another 37 per cent say they’ve lost ground this year, but expect their investments will recover, while only 14 per cent expect to never regain investment losses faced during late 2001 and 2002.
“Most Canadians are optimistic about their long-term investment goals and their future, particularly if they’ve been working closely with an experienced financial advisor through the past 12 months,” said Bruce Gordon, Executive Vice President of Canadian Operations for Manulife Financial. “Through three years’ of polling, we know that Canadians traditionally lean toward ‘safer’ places to invest — and that’s particularly true in light of recent market events reflecting corporate governance cases affecting equity markets.”
Fully 70 per cent of Canadians surveyed said they have not changed their investment strategy in the past year. Less than a third (28 per cent) had changed their strategy while two per cent did not respond.
When asked if they feel the stock market will improve in the year ahead, 41 per cent agreed, while 27 per cent expect it to remain the same. Only 22 per cent predicted markets will decline.
The latest Manulife Investor Sentiment Index poll found some expected reactions to recent declines in equity markets, with Canadians showing relatively higher interest in fixed income investments, cash and real estate, compared to stock-market-related investments.
None of 10 categories used to calculate the index gained ground from three months ago, while cash, investing in real estate and fixed income showed only minor declines.
Mr. Gordon said the latest survey reflects recent concerns raised by cases such as Enron and WorldCom, despite considerable strength in the overall Canadian economy. “Manulife offers a wide range of financial services and products to more than 3.5 million Canadians and the Index helps us gauge what Canadians are generally saying about where they favour investing in the economy.”
The overall Fall 2002 Manulife Investor Sentiment Index, based on a survey of 1,004 Canadians by Thompson Lightstone & Company, fell nine points to +14, its lowest point in three years. The quarterly index monitors what Canadians say they feel about 10 different investment categories and vehicles. The index reflects the percentage of those surveyed who say they believe it is a good or very good time to invest — minus the percentage who say it is a bad or very bad time.
“Investors need to work closely with their advisors, who can help them assess their long-term goals and short-term needs — including a close review of their guaranteed versus variable products,” Mr. Gordon said.
Fixed income, cash, real estate hold ground
Among six investment categories in the survey, indices held steady for investing in their own home, while marginal declines appeared for fixed income, investment property and cash. After soaring near record highs earlier this year, investing in real estate (including mortgages, renovations and investment properties) eased slightly, while stocks and mutual fund indices reflected uncertainties in equity markets. Reflecting the overall market climate, investment vehicles including RRSPs, mutual funds and segregated funds all registered significant declines.
The Manulife Investor Sentiment Index is determined by the following six investment categories:
- Investing in their own homes (either renovations or mortgages) remains the most popular investment for Canadians. Traditionally the favourite of six investment categories, investing in their own home held steady (after climbing 17 points in mid-June) to +53. The index reflects 66 per cent of those surveyed who said it’s a good or very good time to invest in their homes, minus the 13 per cent who believe it’s a bad or very bad time.
- Real estate other than their own homes was the next most popular investment, but decreased by three points to +34, partly reflecting current trends in mortgage interest rates.
- Fixed income investments (including GICs, annuities) eased slightly by two points to +16, reflecting recent changes in interest rates.
- Cash (including savings accounts) also fell only slightly, by one percentage point, but remained among the least favourite destinations for investors. The index for cash registered at +2, reflecting 39 per cent who said it’s a good or very good time to have money in cash, compared to 37 per cent leaning the opposite direction.
- Concerns about stock markets drove the index for investing in stocks deep into negative territory, amid a flurry of recent news about corporate governance and potential developments in the war against terrorism. The index fell 25 points, from +3 in June to -22 in the latest poll. A quarter (25 per cent) of those surveyed considered it a good time to invest in stocks, either directly or via mutual funds, while 47 per cent said they still view equities as a bad choice. Some 16 per cent felt it was neither a good nor bad time to buy stocks.
- Balanced funds dropped sharply by 23 points to +1 in the latest poll. One third (33 per cent) of those surveyed said balanced funds are a good or very good place to invest, compared to 32 per cent who felt the opposite.
As well as evaluating the six investment categories above, the same question was asked of four investment vehicles.
- Registered Retirement Savings Plans remained the traditionally most popular investment vehicle, easing 12 points from the previous survey. The index of +41 for RRSPs reflects 60 per cent of respondents who feel it’s a good or very good time to put money into RRSPs while 19 per cent said it was a bad time.
- Registered Education Savings Plans, which rivalled RRSPs in popularity in December for the first time in three years, was only slightly lower. The index for RESPs reached +39, down six points from three months earlier.
- Following a strong rebound last spring, mutual funds registered the largest decline in consumer interest in the latest poll, declining by 25 points. Reflecting net redemptions and industrywide weaker mutual fund sales through September, the index for mutual funds now stands at minus 2. A third of Canadians said now is still a good or very good time to invest in mutual funds, while 35 per cent said it was a bad or very bad time.
- Segregated funds registered a smaller decline of nine points in its index, to +6, with 36 per cent of those surveyed saying it’s a good time to invest in segregated funds compared to 30 per cent stating the opposite.
The poll by Thompson Lightstone was conducted with 1,004 Canadians aged 18 and older between September 26 and October 2, 2002. The results have a margin of error of +/- three per cent, 19 times out of 20.
About Manulife Financial
Manulife Financial is a leading Canadian-based financial services group operating in 15 countries and territories worldwide. Through its extensive network of employees, agents and distribution partners, Manulife Financial offers clients a diverse range of financial protection products and wealth management services. Funds under management by Manulife Financial were Cdn$139.8 billion as at June 30, 2002.
Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘0945’ on the SEHK. Manulife Financial can be found on the Internet at www.manulife.com.