Will global markets stabilize or will risk-averse investors drive market trends? A new Credit Suisse white paper contends that after a volatile year in which investors retreated to "safe haven investments," recent developments suggest they might consider increasing their exposure to riskier assets
The European debt crisis continues to be closely watched by investors, according to recent surveys conducted by Millionaire Corner. Investors with a net worth between $1 million and $5 million (not including primary residence) said in a fourth quarter survey that were more concerned about the European debt crisis than they were about the downgrade of the U.S. credit rating. Nearly three-quarters (72 percent) said that the crisis in Europe would impact the way they invest.
In a February Millionaire Corner survey, affluent investors said that international problems was the news story that was most impacting their economic outlook.
But Robert Parker, managing director and senior advisor to Credit Suisse, contends that many of the risks that concerned investors in 2011, including a global recession and “a hard landing” in China—have diminished.
“While concerns around fiscal issues in the Eurozone still remain,” he writes, “recent economic data suggest signs of a modest recovery. We are further encouraged by the recent European Central Bank’s (ECB) recent actions, which provided much needed liquidity and refinancing to Eurozone banks. These points, in combination with fiscal progress among peripheral Eurozone countries such as Span and Italy, should diminish the severity of the global crisis, in our view.
“Is it time to re-risk? The white paper notes that “investor sentiment in recent months has rebounded from the lows in July and August of 2011. As such, investors’ risk aversion appears to be slowly dissipating… (It) could remain depressed in the short term. However, we believe that risk appetite will gradually increase, with a sustained rally in the latter half of 2012.”
A February survey of conducted by Millionaire Corner found that 50 percent of investors expressed an intent to invest internationally, while 13 percent said they would not. Almost one-third (31 percent) are presently ambivalent. Investors under 40 were the most gung-ho (52 percent) on international investment.
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.