Readers were asked in a year-end poll by Ignites (a Financial Times Service) what they thought the main market trends of 2012 would be (they were given a list of items to choose from). The two top trends that they identified were 1) the return of individual investors into equities; and 2) the growth of exchange-traded funds (ETFs) and other passive investment strategies at the expense of mutual funds. I agree with them on the latter but not the former.
Investors continue to be fee-sensitive, and given the relatively poor performance of the equity markets for awhile now, the popularity of ETFs should continue to grow. After all, to many investors, if returns are going to be low, why reduce them further with higher cost mutual funds?
I am surprised that the number one answer (28% v. 26%), however, was that individual investors would return to the market. I personally think that this is wishful thinking on the part of financial services professionals. As I state in the article, ” I think that the combination of global uncertainty (especially in Europe) and the election are going to make investors hesitant to get back into the markets. I think that the market will be flat for the year and then we might get a year-end rally after the election.”
What do you think? Click here to read the entire article.
Have a great New Year’s weekend. 2012 should be an interesting year.
