Investor Confidence in US Companies Inching Upward

By Christina Camara

On September 19, the Center for Audit Quality (CAQ) released its sixth annual "Main Street Investor Survey," which shows that investor confidence in capital markets has increased 4 percentage points since 2011, with 65 percent saying they have "a great deal of confidence, quite a bit of confidence, some confidence, very little confidence, or at least some confidence." The survey defines "investors" as those with $10,000 or more in such investments as mutual funds, stocks, IRAs, 401(k)s.
 
By way of comparison, confidence in capital markets outside the United States fell 8 percentage points, to 35 percent.
 
Confidence in investing in US publicly traded companies leveled off at 71 percent this year, a 1-point drop from 2011, and a 5-point drop from years 2008 through 2010.
 
CAQ Executive Director Cindy Fornelli said, "Individual investors, as a group, have confidence in audited financial information released by public companies and believe that auditors are effective in looking out for investors' interests." 
 
Other findings:
  • 69 percent of those surveyed say they have confidence in audited financial information released by public companies.
  • 70 percent believe the American economy will either stay the same or improve over the next year; 20 percent believe it will get worse.
  • 25 percent expect their personal financial situation to improve; 64 percent expect it to stay the same over the next year.
  • The top four economic concerns are: (1) not having enough money for retirement, (2) not being able to afford health care in case of serious illness or injury, (3) not being able to maintain their current standard of living, and (4) fear of losing their jobs.
 
The survey was conducted after some disappointing news that was expected to dampen consumer confidence but didn't: the lackluster initial public offering of Facebook and news that JPMorgan Chase and Co. lost more than $4 billion in derivatives trading. But, according to an InvestmentNews.com report, Fornelli said, "I don't know that the average investor is that attuned to individual companies and individual stocks."
 
The CAQ conducted just one of a flurry of consumer confidence surveys. The National Association of Home Builders says the "builder confidence index" is at its highest point since 2006, and new-home construction is up nearly 30 percent from a year ago, New York magazine reports.
 
In his New York magazine article, "The Confidence Game: The Economy Is Recovering, Most of Us Think," Kevin Roose says, "So, with a pile of imperfect polls and statistics mostly pointing in the same direction, it's relatively safe to say that four years after the near-collapse of the financial system, we're seeing the light at the end of the tunnel - or at least we think we are."
 
Yet another survey indicates that perceptions don't always match the facts. BusinessWeek reported on a survey by Franklin Templeton that asked individual investors about their perception of markets since the previous year. In 2011, 48 percent of investors said the markets were down over the course of 2010, when the Standard & Poor (S&P) 500-stock index rose more than 15 percent. Data released September 18 shows that 53 percent thought the S&P had dropped 2011, but it actually rose 2 percent.
 
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