Confidence in U.S. Capital Markets Down Significantly Since 2007

Investors’ confidence in U.S. capital markets continued a five-year trend of declines in 2011, according to the AICPA-affiliated Center for Audit Quality’s (CAQ) fifth annual Main Street Investor Survey, and confidence in investing in U.S. public companies declined for the first time since the survey started asking the question in 2008. However, confidence in audited financial statements held steady for a third straight year.

The survey said 61% of investors indicated they have some, quite a bit, or a great deal of confidence in U.S. capital markets—down from 68% in 2010 and 84% in 2007, the first year the CAQ conducted the survey. Investor confidence in U.S. public companies declined to 70% after three straight years at 75%. Investors with more than $100,000 invested had more confidence investing in U.S. publicly traded companies (79%) than those with less than $100,000 invested (63%). 

“We are now in a unique position to track investor sentiment over a five-year span of time—one marked by challenging economic circumstances,” CAQ Executive Director Cindy Fornelli said in a press release. “The fact that 70% of investors still have confidence investing in publicly traded companies indicates that investing remains a key strategy for Americans.”

After declining from 80% in 2007 to 73% in 2008, 69% of investors expressed confidence in audited financial information released by publicly traded U.S. companies, consistent with 2009 (70%) and 2010 (70%) survey results.

This year the smallest share of investors reported changing their investment behavior (35%) in the four years the question has been asked. That’s down from 48% in 2010 and 61% in 2008; 64% said they did not change their investment behavior, up from 52% in 2010 and 40% in 2008. The CAQ said these numbers suggest that more and more investors have adjusted their behavior since the beginning of the recession and are now “staying the course.”

Among the investors who expressed confidence in U.S. capital markets, the top reasons cited were economic news and data (36%), confidence or trust in the U.S. government and/or the president (25%), the market’s strength (14%) or belief that the recession is over/ending (10%). Among those expressing a lack of confidence, the top reasons were the economic crisis/recession (26%), too much government spending or interference (18%), weak government oversight of capital markets (12%) and volatility of the U.S. stock market (9%).

Confidence in foreign capital markets continued its steady decline, falling to 43% from 47% in the previous survey and 65% in 2007. Confidence in capital markets outside the U.S. has fallen every year since 2007. The top reasons for lack of confidence were debt problems/bad economic climate worldwide (23%), debt crisis problems in Europe/Greece (specifically) (11%) and lack of knowledge of overseas markets (9%).

Investors’ two biggest financial concerns were not having enough money for retirement (59%) and not being able to afford health care if they or a family member are seriously ill or injured (54%).

The CAQ is an autonomous public policy organization based in Washington. It is dedicated to enhancing investor confidence and public trust in global capital markets. The survey of 1,003 investors was conducted Sept. 6–14 via telephone interviews by the Glover Park Group. Investors were defined as those with investments valued at $10,000 or more.