In Spite of Shutdown and Potential Debt Default, Investors Stand Pat
NEW YORK (MainStreet) As concern mounts about U.S. financial affairs, investors are anxious about the economy, but not rushing to adjust their investment portfolios just yet. But nearly three-quarters (72%) of investors surveyed say the government shutdown and impending debt-ceiling issue has begun to diminish their confidence in the economy's recovery, according to a poll conducted by TD Ameritrade.
And still, investors aren't making knee-jerk reactions in the midst of the Washington turmoil. Fully 41% say they haven't made changes to their investments but may pull back to a more defensive posture if the debt dilemma continues. Another 37% of investors say they think the shutdown/debt-ceiling issue will pass quickly and therefore they haven't taken action in their portfolios; 12% say they are taking advantage of opportunities as a result of the issue; and 10% have already moved some money to cash temporarily.
"Some investors likely aren't adding positions or taking on new risk yet until there is a clear picture as to how the shutdown and debt-ceiling deadline will settle," says J.J. Kinahan, chief strategist at TD Ameritrade. "With about 1 million people furloughed from their government jobs there is concern that this could have an impact on retail sales, housing and durable goods."
There does seem to be a significant lack of optimism among investors, though. In spite of all of the doomsday predictions, one-quarter of those surveyed say it is very likely the government will default on its debt, while another 44% say it's somewhat likely.
"The shutdown has brought with it renewed economic uncertainty, and many investors may have questions about how to adapt their positions for a variety of potential outcomes," says Tom Bradley, president of retail distribution for TD Ameritrade. "We encourage investors to educate themselves and seek guidance or help, if necessary, before making their next move whatever that may be."
By Hal M. Bundrick for MainStreet