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Investors Eye International Stocks
U.S. Slowdown Stokes Overseas Interest
Worried that the economy may slide into a recession this year, individual investors plan to protect their core assets by making conservative moves and monitoring opportunities among international stocks, according to a recent survey.
In the Schroder U.S. Individual Investor Survey conducted late last year, 72 percent of American investors said they believe the U.S. economy will go into a recession in 2008. Survey participants cited a recession as the No. 2 threat to their portfolios, following poor investment decisions.
Most investors believe international stocks will outperform domestic stocks this year, and more than half of those surveyed (54 percent) expect Asian and emerging markets to record the highest returns for investors. Only 10 percent, however, plan to invest in international and emerging market stocks in 2008. Four percent of investors surveyed with annual incomes of less than $25,000 said they plan to invest in international stocks, while 28 percent of those with incomes above $75,000 plan to acquire foreign stocks.
Fifty-seven percent of those surveyed hope to follow an “active” approach to investing this year, defined as identifying the best individual stocks or mutual funds rather than investing in index funds. Twenty-three percent said they’ll invest in mutual funds. The survey also found that 37 percent of American investors plan to put money into certificates of deposit, savings accounts or money market accounts this year.
Fears about the slowing economy are reflected in declining levels of consumer confidence. According to the RBC Current Conditions index, which measaures Americans’ attitudes about investing and the economy each month, consumer confidence in February fell to a record low of 63.6 on a baseline of 100. This is the lowest level since the index was established in January 2002.
Thirty-five percent of participants in the RBC Consumer Attitudes and Spending by Household Index survey for February considered the economy to be weak, compared with 32 percent who rated it weak in January. Thirty-one percent of consumers rated their personal finances as weak in February, compared with 27 percent in January.
More than half the consumers (52 percent) polled in February are less confident about making investments, compared with 48 percent in January. Twenty-two percent said they felt comfortable making a large purchase such as a house or a car, down from 28 percent the month before.
Some survey respondents spy an opportunity in the softening economy. Forty-one percent said the next 30 days would be a good time to buy real estate, up from 36 percent in January.
Kate Fitzgerald is a free-lance writer based in Scottsdale, Ariz., specializing in business and technology.