- Investors should consider investing cash in the market now, according to Vanguard’s global head of investor research and policy.
- Retail investors are trading less, indicating a “stay the course” stance and a more optimistic economic outlook, explained Fiona Greig.
- She believes investors can take advantage of the current landscape by increasing their savings rate and relying more on employer-funded retirement accounts.
Investors are increasingly holding onto the market despite volatility, and that points to optimism about the broader economic outlook, according to Fiona Greig, Vanguard’s global head of investor research and policy.
There has been less retail activity of late, and this willingness to hold positions suggests a more optimistic view on stocks, she told Insider in an interview.
“Yes there was volatility but the longer term outlook [investors] For the stock market is stable,” Greig said. “Unless they have specific liquidation or exit needs, investors are really staying the course, and I think that’s good news.”
In a Thursday note from Vanguard detailing trends in investor behavior, data shows investors in December expected stock returns of 2.7% over the next 12 months, up from a five-year low of 0.6% in October, but always even more pessimistic than a year ago.
And investors’ 10-year yield expectations have been relatively stable, falling to 7% last month from 7.2% in October, reinforcing Greig’s view that near-term market shocks have not yet turned off the majority of investors. The numbers show that it’s still a buy-and-hold environment.
“One way to read this is that rate hikes are priced in,” Greig said. “Look at the rate hike in December, it was a non-event in the markets. I think this suggests that the markets are expecting a moderation strategy from the Fed. There are some lower expectations for short-term stock market returns, but we’re seeing pretty clear expectations and optimism for returns over the next 12 months and even 10 years.”
Increase savings rates for 2023
Rising optimism suggests it could be a good time to put cash into the markets, which Greig says could be done with minimal risk and at low cost. She said that right now there is an opportunity to increase your savings rate and accelerate the allocation of funds.
“I would make sure I benefit from employer-sponsored retirement plans now,” she said.
The investment strategist added that it is important not to let volatility tempt you to change strategy or trim positions. Fluctuations are to be expected after a brutal year like 2022, she said, and the ongoing stalemate on the debt ceiling could add further uncertainty.
“Stay the course,” Greig said. “Don’t let volatility and short-term fluctuations tempt you to withdraw unnecessarily.”