Investor confidence in U.S. markets rises, CAQ survey shows

U.S. investors’ confidence in domestic capital markets has rebounded, but their faith in markets outside the United States has continued to decline, according to new research by the Center for Audit Quality (CAQ).

Sixty-five percent of investors reported that they have some, quite a bit, or a great deal of confidence in U.S. capital markets in the sixth annual Main Street Investor Survey released today by the CAQ, which is affiliated with the AICPA. That is an increase of four percentage points over the previous year.

That percentage had decreased in the 2010 and 2011 surveys; it still significantly trails the 84% who reported confidence in U.S. markets in 2007—before the financial crisis.

“This year’s results suggest that confidence about domestic markets may have stabilized and perhaps even begun to rebound,” CAQ Executive Director Cindy Fornelli wrote in the introduction to the survey report.

In contrast, confidence in capital markets outside the United States fell eight percentage points to 35%. The percentage has dropped each year since 2007, when 65% of investors reported confidence in capital markets abroad.

The survey drew responses from 1,003 U.S. adults who live in households with $10,000 or more in investments, including stocks, bonds, mutual funds, IRAs, and 401(k)s.

Investors who indicated little or no confidence in U.S. capital markets most frequently blamed the state of the economy (37%), followed by too much government regulation (25%) and weak government oversight of capital markets (22%).

Those who lacked confidence in capital markets outside the United States most often cited the European debt crisis and problems with the euro (27%), the worldwide economy (25%), and instability of governments (15%).

When asked about their outlook on the economy, 64% said they expected their personal or family financial situation to remain about the same, while one in four predicted improvement. The percentage of people planning a major purchase such as a home, car, or vacation held steady at 25%.

Independent auditors of public companies remained the group that investors trust the most to look out for their interests. Confidence in public company auditors grew three percentage points to 70%, ahead of financial advisers and brokers (66%), public company audit committees (65%), and other groups. Government regulators (39%) were the group investors trusted the least to look out for their interests.

Confidence in audited financial information released by public companies held steady at 69%, and respondents who reported confidence investing in U.S. public companies rose one percentage point to 71%.

—Ken Tysiac (ktysiac@aicpa.org) is a JofA senior editor.