Rampant inflation, concerns about rising interest rates, geopolitical uncertainty, and a massive selloff in tech stocks and risky assets have rattled individual investors' confidence in recent weeks. According to the latest investor sentiment survey of our daily newsletter readers, the recent bout of volatility has led to a pullback in purchases of stocks and cryptocurrencies, and an increase in ETFs, Index funds, and commodities. Forty percent of our readers said that recent market events have prompted them to make “safer” investments, which is an eight-percentage-point increase from our November 2021 survey results, and the highest levels we have seen since October of 2020.
While most respondents still predominantly hold individual stocks, the increase in their purchases of mutual funds, index funds and ETFs is notable given the steep declines among some of the most widely held stocks in their portfolios like Meta Platforms (FB) and Tesla (TSLA). Both institutional and individual investors have been rotating their money from growth sectors to value sectors since the beginning of the year, but the emphasis on ETFs and mutual funds also shows their desire for diversification in their portfolios.
Investors' Top Concerns
It’s not surprising that inflation remains the number one concern among our readers given that it's at a 40-year high here in the U.S. Inflation and rising interest rates dominate our readers' list of concerns, followed by geopolitical conflicts. Our survey was fielded as tensions between Russia and Ukraine escalated, which likely exacerbated those fears. It’s also notable that our readers are less concerned about the spread of new COVID-19 variants, with only 34% of respondents listing that among their top worries.
Where’s the Froth?
Despite the correction in the Nasdaq and the bear market that has ravaged tech, biotech, meme stocks and cryptocurrencies, our readers still think there is air in several bubbles. Bitcoin tops the list of assets in a bubble, according to our readers, as it has for the past year. The price of Bitcoin has fallen more than 35% from its recent highs in late 2021, yet 33% of respondents selected it as their top choice, followed by NFTs at 30% and Dogecoin at 28%. Only 15% of readers said the S&P 500 is in a bubble, and only 5% selected commodities, which stands given the surge in energy and food prices over the past several months.
Still Bullish, Despite Recent Pain
Our readers, who are all either self-directed investors, or working with advisors, have always been the bullish-type. The steep but quick bear market in April of 2020 tested their fortitude, but they have largely been optimistic about future returns in the stock market. The recent correction in tech stocks and the rise of Treasury bond yields has done little to shake their confidence in recent weeks. Fifty-two percent of our readers expect gains in the S&P 500 over the next six months, with 25% of them expecting gains of 5% or greater. In fact, 63% of respondents said they are “buying the dip,” while only 31% said they’ve been selling and taking profits.
Playing Their Favorites
Our readers have always played their favorites when it comes to stock picking, and their tastes haven’t changed much despite the recent selloff. Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Nvidia (NVDA) and Alphabet (GOOG/GOOGL) have always been among their top ten holdings, although our readers trimmed their positions in Apple and Nvidia since November of 2021. It’s notable that there are no oil or energy stocks in their top ten despite the outperformance of that sector over the past several months. JPMorgan Chase (JPM) was a new addition to the top ten, which is not a surprise given the strength of financial stocks since the beginning of the year.