Investors Slowly Warming to Market Realities

Investor sentiment remains near multi-year lows after the worst first half of the year for markets in fifty years, but the recent rally from mid-June lows may ease investor anxiety. That’s according to Investopedia’s latest survey of reader sentiment for our daily newsletter. While 55% of respondents say they are at least somewhat “worried” about recent market events, this is down slightly from our last survey in June. One in five readers say they are “very worried” about market events, which is also down five percentage points from our June survey, but still significantly higher than our survey results through 2021.

The recent rally in the US stock market from mid-June lows may ease their anxiety, coupled with the fact that energy prices have retreated from recent highs. Additionally, last week’s interest rate hikes by the Federal Reserve, which were well telegraphed, were priced in by investors, which drove the stock market higher following the announcement.

Although the stock market has stabilized for now, more than 40% of our readers still think it will trade lower over the next three to six months. Meanwhile, 37% of our readers think the stock market will rise over the next three to six months, with 5% expecting returns of 10% or more. The almost even distribution of our readers and their market predictions speaks to the general uncertainty in capital markets.

While sentiment remains generally weak among institutional and individual investors, both groups have slowly put money back to work in U.S. equity markets. Late July purchases by individual investors of popular tech stocks hit their highest level since at least 2014, according to Vanda Research. Yet one in three readers who responded to the survey say they are investing less than usual, considering given his concerns about their wallets. Only 21% say they invest more.

What are investors concerned about now?

Investors’ list of concerns is long, but has remained fairly consistent throughout 2022. Inflation tops their list of concerns, followed by a potential recession, geopolitical uncertainty and rising prices. interest rate. These have all been the dominant themes surrounding the direction of the global economy and financial markets this year. At the bottom of their list is the spread of new variants of COVID-19 and deflation.

What do investors do with their money?

While some intrepid investors make their money grow in the stock market, those who don’t are always waiting for more signs of a good run. One in three respondents to our survey say they are investing less, with 62% saying they think the stock market needs to drop further before they feel comfortable. 43% say they fear a recession will impact the market and are staying away for now.

On the other hand, 56% of our readers say they are “buying the dip”, while only 23% say they are selling stocks and taking profits. Only 12% said they had sold stocks at a loss.

As for their favorite stocks, our readers have been pretty consistent over the past two and a half years. The majority of our readers across all age groups continue to favor large-cap tech and consumer stocks like Apple, Microsoft, Amazon and Alphabet. Tesla dropped out of the top ten in that survey, replaced by Exxon-Mobil, one of the best performing stocks in the S&P 500 so far in 2022.

What about crypto?

Our readers’ appetite for cryptocurrencies like Bitcoin has waned significantly over the past few months as prices for digital tokens have fallen significantly. In late 2021 and early 2022, 33% of our readers who responded to our survey said they owned a cryptocurrency, with most of them preferring Bitcoin. That number has dropped to 27%, and among the 54% who say they have never bought and never will, “lack of confidence” is their top reason.