Every month, investors brace for the latest news or the next forecast in an effort to make sense of the volatile stock market. The overall equity market is significantly down from the relatively recent all-time highs from early this year, so millions of Canadians have a bad case of the bear market blues.
To better understand the impact of this year’s bear market on investor sentiment and behaviour, Finder asked more than 1,000 Canadians how confident they are in the stock market in 2022 and the investment strategy they will use to navigate this downturn.
The Finder: Bear Market Blues report results show that nearly one-quarter (24%) of Canadians have no confidence in the stock market. This translates to 7.5 million Canadians who plan to cash out this year. Still, despite widespread market fears, most Canadian investors are in the markets for the long term, choosing to buy and hold in 2022.
A bear market is when the stock market experiences a prolonged downturn, typically 20% or more from recent highs. An entire index can experience a bear market, or individual securities can be in bear market territory.
Unlike recently, experts believed the 2022 bear market would be nothing more than a quick dip before a relatively fast recovery. It’s how other market downturns in recent years have recovered, so why not this time? Unfortunately, unlike previous stock market downturns, new stimulus plans and lower interest rates were no longer an option. This uncertainty started to build, prompting many investors to take a more negative perspective on the near-term future of the stock market — for some, it even meant red-line returns.
Finder polled more than 1,000 Canadians to assess investor confidence about their investment plans, current strategy and ongoing stock market confidence.
Turns out most Canadians (74%) are not convinced they’ll earn a profit on their investments in 2022. Digging deeper, 24% of Canadian investors, representing 7.5 million Canadians, said they were “not confident” in the stock market in 2022 and planned to “cash out.”
"Based on our data, we see that 1 in 4 Canadians are looking to minimize their market losses by cashing out in 2022. This could become a big problem," explains Romana King, senior finance editor with Finder. "We know emotions can lead to inopportune market timing with people selling in the dip and buying at the peak. For investors interested in minimizing their losses, the key is to buy and sell based on market fundamentals, not fears about the market."
The recent Finder Bear Market Blues survey also asked Canadians how they were planning to navigate the current stock market downturn. According to survey results, the top three investing strategies include:
"To withstand market volatility, investors need to review, assess and invest based on their needs, goals and investment strategy," explains King. "Based on Finder's recent survey data, it appears that most Canadian investors can appreciate the need to stay the course, even during market downturns."
Still, Finder's recent survey data did show that 1 in 4 Canadian investors plan to cash-out in 2022, to minimize losses.
Women were more likely to cash out, with 28% planning to eliminate all or a portion of their equity portfolios in 2022, compared to 18% of men.
This need to take action may be motivated by a lack of confidence in the current equities market, with 20% of women "somewhat" or "very" confident in a stock market recovery, compared to 34% of men.
According to the Financial Consumer Agency of Canada (FCAC), Canadian women have historically lagged behind men in investing knowledge and confidence.
This lack of confidence and knowledge reflects how women and men approach investment strategies and planning. Turns out, 15% of female investors acknowledged they had "no investing strategy for 2022," compared to 11% of male investors.
Most experts agree that buy-and-hold investment strategies are appropriate for the majority of investors as it helps portfolios to withstand market volatility and helps eliminate activity risks, such as trading based on fears and emotions. However, when asked, just a little more than a third (36%) of female investors traded on the stock market using this investment strategy compared with 47% of male investors.
When examining the impact of the current bear market on investors, Finder survey data showed that age does make a difference.
The younger the investor, the more confident they were in a recovery from a bear market to a bull market and the more certain they were of earning a profit in 2022, despite current conditions. According to survey results, almost half (40%) of Canada's youngest investors, Gen Z (between the ages of 18 to 26), said they were "somewhat" or "very" confident they could meet or exceed their return expectations this year. Contrast this with 13% of baby boomers (between the ages of 57 to 76), who believed they would meet or exceed their investment return projections this year.
"Canada's youngest investors are optimistic, and this is good, particularly for those investors with a long time horizon and an investing plan," says King. "But these younger investors also have no experience with a prolonged market downturn, or limited access to capital, factors that will make the next few months and years tougher for investors."
Interestingly Gen Z investors were seven times more likely to say their primary investing strategy for 2022 was 'Core and Explore' compared to Baby Boomer investors (21% vs 3%). With their extremely high level of confidence in the markets compared to older generations, it is no surprise that Canadians between 18 to 24 have not abandoned investing in individual stocks despite the market being down in 2022. Whereas Baby Boomers were more than twice as likely as their younger counterparts to use dollar cost averaging as an investment strategy (14% vs 6%).
According to survey data, households earning more than $100,000 annually are far more confident in withstanding the current market downturn than those earning less than $100,000.
Of the investors planning to cash out of the stock market in 2022, more than three-quarters (78%) earned less than $100,390 (the top earnings before the next tax bracket).
Another factor significantly impacted how confident an investor felt about the stock market was where the person lived.
Albertans are Canada's most reactive investors
Almost half of Alberta's investors (49%) use a 'buy and hold' or long-term strategy, with 45% unsure about the market but planning to stay the course — more than any other region in the country. Alberta's investors are also the most confident (13%) to meet or exceed their returns in 2022. Conversely, 20% of Albertans are uncertain about the market this year and plan to cash — the highest in Canada.
British Columbians are the most confident investors overall
Turns out 1 in 3 B.C. investors is either somewhat or very confident that they can meet or exceed their returns in 2022 — the highest in Canada. However, British Columbian investors are the least likely to have a specific investing strategy, with 1 in 4 without or unsure of their investing strategy in 2022. B.C. also has the highest percentage of investors (6%) who use day trading as their primary investing strategy.
Quebec investors use the widest variety of investing strategies
When compared to the rest of Canada, Quebec investors are the most likely to follow a passive or buy-the-index (9%) investment strategy, have the highest percentage of investors (19%) using the "core and explore" investment strategy, also most likely (11%) to use dollar-cost-averaging.
Ontarians least confident in the stock market in 2022
More than other regions, Ontario investors are the least confident in the stock market, with 1 in 4 planning to cash out in 2022. When it comes to an investing strategy, Ontario investors are most likely to focus on income investing (12%), and 12% focused on stocks or ETFs using a dividend strategy.
Prolonged bear markets can take a toll on investment earnings, portfolio growth and investor emotions. This market stress can lead to poor choices and emotional reactions, like cashing out at the wrong time or without a plan.
"It's difficult to sit back and do nothing, particularly when it feels like the boat is sinking," says King.
"Instead, investors need to focus on how to withstand market volatility — and to do this, you need to review, assess and act on your investment plan."
Canadian investors can use these three tips to help navigate the current bear market.
For instance, if an investor was concerned about prolonged inflation and shrinking economic growth, they could shift their portfolio weightings and go heavier on consumer staples and utilities, two sectors that perform better in recessions. The key is creating a balance that allows your portfolio to withstand general market downturns while providing ongoing earnings.
Finder is a personal finance comparison site with a mission to help Canadians save, invest, spend wisely and grow their wealth. Each month, Finder provides half a million Canadians – and more than five million globally – with independent and trustworthy financial information. Our goal is to help people make better financial decisions by providing objective, comparative insight on thousands of products and services.
As a global fintech website and app, Finder provides consumers free access to smart money content. Whether it's expert insight, product or service comparisons or independent reviews, Finder helps consumers stay on top of their finances while saving time and money.
Finder is available to consumers in Canada, Australia, America and the United Kingdom. Initially launched in 2006 by three Australians – Fred Schebesta, Frank Restuccia and Jeremy Cabral – Finder's global reach now includes thousands of products and services in hundreds of financial categories and provides expert content and independent reviews to more than five million users each month.
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