Key Takeaways
- While most investors still describe themselves as “cautiously optimistic”, the latest Investopedia Investor Sentiment Survey found they’re still less inclined to invest more money right now, and have pulled back from riskier assets.
- Only 21% of respondents are expecting the S&P 500 to gain 5% or more in the next six months, a drop from 33% in early March.
- Nearly half, or 48%, believe the stock market is overvalued, and that A.I. related stocks and mega-cap tech are the most frothy, according to the survey.
- Inflation is once again the top concern for investors, with 2 in 3 readers worried about its impact on their portfolios.
The recent reversal in the stock market and renewed concerns about inflation has curbed individual investors’ enthusiasm for the prospect of future returns, despite claims they're not extremely concerned. According to Investopedia’s latest sentiment survey, readers say they’re less inclined to invest more right now, and have pulled back from riskier investments—but investors still claim they’re “cautiously optimistic."
Muted Expectations for Future Returns
Only 21% of respondents are expecting the S&P 500 to gain 5% or more in the next six months, a drop from 33% in early March. After reaching multiple record highs in March, the stock market has fallen 3.7% amid a rise in Treasury bond yields and a slowdown in first quarter GDP. Some of the most widely-held stocks, including Apple (AAPL) and Nvidia (NVDA), have suffered steep corrections, which may have contributed to this recent shift in sentiment.
Investing Less Given Uncertainty
While 37% of respondents describe themselves as “somewhat worried” about recent market events—a drop of five percentage points from early March—only 14% of respondents say they will be investing more, given the recent pullback. That’s down from 22% in early March, and evident in recent fund flows by retail investors.
Leaning Into ETFs Amid Volatility
While individual investors are still leaning more into ETFs than money market funds, CDs, and stocks, their appetite for exchange traded products and individual equities has waned since the end of the first quarter. ETFs remain their asset of choice, according to the survey, but only 25% of respondents selected it as their first choice, down from 32% in early March, while their appetite for equities has also decreased by ten percentage points in that time frame.
Bubbles, Bangles, Bright Shiny Things…
Investors’ reluctance to fully commit to stocks may also be influenced by the fact that many still believe there is frothiness in several sectors of the market. Nearly half, or 48%, believe the stock market is overvalued, and that A.I. related stocks and mega-cap tech are the most frothy, according to the survey. That’s noteworthy, given that most respondents hold many stocks from those sectors in their portfolios.
Inflation Tops Investors Concerns
Investors and households have been wrestling with persistent inflation for the past several years. But it was not our readers top concern for the past several months as the upcoming presidential election has been their number one cause for anxiety about their portfolios. As the Federal Reserve has turned more hawkish given the stickiness of inflation, persistently high prices have now reclaimed that top spot, followed by the election and the war in the Middle East.
What Would You Do with an Extra $10,000?
Despite investors’ concerns about inflation, bubbles in the stock market, and geopolitical uncertainty, stocks would be their top choices of what they would do if they had an extra $10,000. While only 14% of respondents said they are investing more given the recent volatility, it’s notable that equities are still their top asset of choice if they had extra funds to deploy. ETFs and CDs are tied for second on their purchase wish-list.
What’s in Your Portfolio?
Even though mega-cap tech, internet, and communications stocks have been among the worst performers year-to-date, our readers have remained faithful to their old favorites. Apple (AAPL), Microsoft (MSFT), and Nvidia (NVDA) remain their top stocks, mirroring some of the most popular index funds and ETFs like (SPY) and (QQQ). Meta (META) and AT&T (T), have made slight gains among respondents’ top choices.
Stocks to Buy and Hold for the Next Decade
As for the stocks our readers would buy and hold for another ten years, the list looks a lot like what they are currently holding. Berkshire Hathaway (BRK) and Walmart (WMT), are on their buy and hold lists, however, replacing Exxon-Mobil (XOM) and AT&T (T).
Methodology
This survey was fielded online to Investopedia readers 18+ living in the U.S. from April 24-29, 2024. Readers must currently hold and manage investments to qualify. Participation in the survey is entirely voluntary; sample composition reflects U.S. 18+ reader base.
