Slow But Steady Wins the Race

01/29/2014 3:15 pm EST

Focus: MARKETS

Kim Githler

Chair and CEO, MoneyShow

“Slow and steady” is the new watchword for investors, based on our latest investor sentiment survey of MoneyShow.com members, notes MoneyShow’s Chair and CEO Kim Githler, after unveiling the results to a packed crowd of serious investors at The World MoneyShow Orlando’s Opening Ceremonies today.

While few expect a repeat of last year’s 30%+ market gains, investors remain solidly on the bullish side, expecting continued gains for stocks and modest improvements in the economy.

This continues a trend first highlighted last May, when The MoneyShow Las Vegas sentiment survey showed that investors had become increasingly optimistic about the economic recovery and were positioning their portfolios for higher stock prices through 2013.

Our just-released sentiment survey of 1,344 MoneyShow.com members shows those trends remaining in force. Investors remain confident in the stock market, with a plurality of investors expecting solid—if not spectacular—single-digit gains for equities.

As we highlighted last May, investors believed the worst was over for the US economy. And while they continue to believe this to be the case, they are subdued in their growth expectations. About 60% of respondents expect GDP growth to be below 3%. Only 16% expect growth to rise above the 3% level.

Respondents are less-than-optimistic regarding one critical component of the economic outlook, as some 65% of respondents see unemployment stuck in a 6% to 7% range. A little over a quarter of respondents expect unemployment to rise above 7%, while just 7% expect a drop below 6%.

In line with subdued expectations for economic growth, investors see inflation well-contained within a range of 1% to 3%. Surprisingly, despite well-publicized concerns over government spending and fears of the Fed’s tapering, only 13% of respondents believe that inflation will increase at a rate greater than 3% this year.

With expectations for limited inflationary pressures, investors are showing a muted enthusiasm for gold investing. Over 60% of respondents expect gold to remain in a range bounded by $1,200 and $1,500 for the year. Indeed, less than 5% of respondents see a rise in gold prices above $2,000.

With limited volatility expected in economic growth metrics, it should also be no surprise that stock market expectations are tempered on both the upside and downside; only 19% of respondents expect stocks to rise more than 10% this year, while only 11% expect shares to fall more than 10%.

To participate in an expected environment characterized by measured growth with an upward bias, most investors in our survey are sticking to tried-and-true assets here at home; 43% of those surveyed expect to reinvest their cash into large-cap US stocks and 45% were looking toward small- or mid-cap US stocks.

Twenty-three percent of respondents are considering investing their cash in international developed market stocks, while 16% are considering investing in emerging markets, with currencies and commodities scoring only single-digit responses. Less than 3% of investors are considering adding to their Treasury bond positions.

When it comes to understanding economic trends and market performance, The MoneyShow community of investors has proven time and again to be one of the savviest groups of investors in the world.

The increasing confidence by these investors in US equities last year was well-rewarded with significant market gains. Their continued confidence in domestic stocks augers well for further gains in 2014, even if those expectations only call for a “slow and steady” advance.

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