Investor sentiment rebounds due to strong market gains

Strong gains by markets in 2019 resonating with Irish investor

• Regular investment patterns strengthen and investors turn more positive on markets
• More people feel they are financially prepared for retirement

The Bank of Ireland/ESRI Savings and Investment Index, which measures sentiment towards saving and investment, was unchanged at 102 in March, with investment and saving sentiment going in opposite directions. Investment sentiment improved on the back of a sharp increase in confidence about the outlook for markets. However, this was offset by softer saving sentiment which slipped back from February, when it reached an all-time high helped by ongoing uncertainty around Brexit.

March results for the Retirement Optimism Index showed another improvement in confidence levels around how people would fare financially in retirement. The index hit 103 in March, the highest level since September. More respondents felt they were financially prepared for retirement – 58% of people felt they had some financial preparation in place, up from 54% in January. In addition the results showed a slight fall in the number of people that would find it difficult to live comfortably in retirement from 38% to 36%.

Investment Index

The Investment Index improved significantly in March, rising from 97 to 101, the first concrete signs that the strong gains made by markets in 2019 were finally resonating with Irish investors.

Tom McCabe, Bank of Ireland Investment Markets commented: “Improved confidence in the outlook for investment markets was central to the gain in the Investment Index in March. This month’s results were the first tangible signs that Irish people are warming to the strong rebound in investment markets this year rather than geopolitical issues like Brexit. This is a positive development and hopefully one that suggests Irish investor sentiment is bottoming out.”

The Investment Attitudes Index was unchanged at 109 in March however there were some positive signs for investment sentiment.

• The percentage of people investing regularly rose to 37% in March, the highest response since the question was first asked in September 2017.
• The percentage of people comfortable with the amounts they were investing also rose slightly to 61% from 58%. However the big driver of the improved investor sentiment in March was the rise in the Investment Environment Index which climbed sharply from 85 to 94, having plummeted in recent months in the midst of rising market volatility and geopolitical concerns.
• The percentage of people that felt it was a good time to invest in March rose from 25% to 30% while those who felt it was a bad time fell marginally from 31% to 29%.
• The improvement was driven by the rebound in many investment markets from December lows – since the turn of the year world stock markets have generated strong returns of 14.2% for Irish investors.

Savings Index

The monthly Savings Index dropped from the all-time high posted in February, slipping from 107 to 103. Small declines in savings attitudes and a marginally weaker outlook for savers accounted for the drop in the index.

• Savings trends eased back slightly in March which pushed the Saving Attitude sub index down from 110 to 106.
• 49% of people were saving regularly in March, down from 51% in the previous month but still a strong reading in a historical context.
• Respondents remained comfortable with the amounts they were putting away for saving with 46% saying they felt they were saving the right amount.

Optimism around the environment for saving also dipped in March with the Saving Environment sub index declining from 103 to 101. Despite the decline in the month, Irish people remain positive on the outlook for saving – 43% of people felt it was a good time to save in March, outweighing the 28% that felt it was a bad time.

In addition to the strong economy, rising Brexit uncertainty has supported saving sentiment over the past couple of months and we saw more evidence of this in March. In the Border Midwest region for example, the incidence of total saving (regular and occasional) rose to 72% in March, the highest reading since October 2016. 54% of Border savers also felt it was a good time to save, the strongest response since the question was first asked in January 2010.

Tom McCabe said: “Saving sentiment weakened in March but the foundations for strong saving behaviour remain firmly in place. Irish economic momentum has slowed a touch but improving employment and wages continue to support positive Irish saving trends. On top of this, the ongoing Brexit uncertainty also seems to be bolstering precautionary saving and the responses from savers in the Border hinterland in March again confirmed this.”