The latest ASB Investor Confidence Report showed nett investor confidence, the difference between those who thought return on investment would improve in the year ahead and those who thought it would get worse, had fallen by 9% points from +19% to +10% in the three months to December.

“I think it would be impossible for confidence to do anything but fall when we think about all the changes and uncertainties we had to deal with late last year,” ASB senior wealth economist Chris Tennent-Brown said.

“Sharemarkets both here and in the US peaked in September, but since then we’ve had a solid three months of negative news, and that’s showed up everywhere from the world’s sharemarkets declining through to KiwiSaver balances.”

Some respondents have become more pessimistic about the future return on their investments. 

Some 25% expected returns from their investments in the next 12 months to increase compared with 29% last quarter, and 39% expect returns to stay the same compared to 42%, while 15% thought it would decrease, up from 10% in the third quarter.

“Unfortunately, people are not always great at extrapolating forecasts from what they observe going on around them. When investments are going up, we can be lulled into thinking the good times can last forever, and when they dip, we often can’t see anything apart from doom and gloom. So people often see returns from a recent period of time as an indicator for the immediate future,” Tennent-Brown said.

“There are some really significant changes to the investment landscape taking place at the moment, particularly in relation to investment property. Tax changes and foreign investment rules can have a major impact, and investors should consider professional advice to understand how these changes may impact them. The Tax Working Group’s findings are another source of uncertainty, although ultimately there is a long way to go from the report to new laws, including an election in 2020.”