The intense market volatility of the first quarter along with rampant inflation are keeping investors back on their heels, but most are still hopeful that the U.S. stock market will produce gains in 2022. These are among the findings in our latest sentiment survey of our daily newsletter readers. A correction in the S&P 500 and a bear market in the Nasdaq have curbed their enthusiasm, prompting 51% of respondents to say they are at least “somewhat worried” about recent market events. That represents a five-percentage-point increase from our previous survey in February, and the highest level of concern we have seen since May of 2020, during the early stages of the coronavirus pandemic.
Seeking Safety Amid Uncertainty
The anxiety is prompting 38% of our respondents to make safer investments, while only 10% are seeking more risk. A higher percentage of our readers say they are investing more in ETFs, index funds, and commodities, and steering clear of foreign stocks and arcane investments such as NFTs. While 29% of respondents say they are leaning further into individual stocks, their list of favorite sectors remains mega-cap tech, communications, pharmaceutical and oil companies.
Investors’ Biggest Concerns
Investors’ biggest concerns currently revolve around inflation, geopolitical conflict exacerbated by Russia’s invasion of Ukraine, and rising interest rates. These have been investors’ top concerns since mid-February, and are widely shared among institutional and retail investors alike. While any of these issues could deflate investor sentiment, having all three occur simultaneously has made investors behave as cautiously as they have since the early days of the pandemic in March of 2020. What’s notable, however, is that only 29% of respondents listed the spread of new COVID-19 variants as a top concern.
Hoping for Positive Returns
Even with these concerns and the anxiety they're generating, 49% of respondents still expect the S&P 500 to deliver positive returns over the next 6 months, while 29% expect negative returns. As for the prospects of a recession in 2022, just 24% of surveyed investors think it is likely, while 31% say it is unlikely.
Where are the Bubbles?
The correction in the S&P 500 and the bear market for prominent tech stocks has removed some of the froth from the equity market. Only 12% say the S&P 500 is “in a bubble.” The frothiest asset, according to the survey, is U.S. real estate, with 31% of readers selecting it as the biggest bubble. A 17% rise in national home prices in 2021 may have something to do with that. A quarter of respondents selected Bitcoin as the largest bubble, even though it has tumbled 31% from its recent record highs, while 23% of respondents selected NFTs as the biggest bubble.
Since oil prices have been driving the inflation spike over the past several months, we asked our readers for their predictions for oil prices by the end of 2022. Over half or 57% of respondents believe oil prices will remain at or above $100 per barrel for the remainder of the year, with 36% of them predicting prices will be at or above $110 per barrel. This survey was fielded as oil prices topped $120 per barrel amid Russia’s invasion of Ukraine, and their subsequent retreat to around $100 per barrel a week later. According to CME, futures contracts for crude oil are currently priced below $100 per barrel for contracts expiring in the July-September period.
What's the Word?
Despite their caution, Investopedia’s readers are mostly glass-full investors. Even amid the most volatile markets and darkest days of 2020, our readers remained optimistic and opportunistic. They were cautious just like everyone else, but they also hoped for better days ahead.
Things haven’t changed much, even though this latest survey shows more caution than we’ve seen since early 2020. We asked our respondents to list one word that describes their sentiment now. Here are their responses:
Research and analysis by Amanda Morelli.