Investor Confidence Remains High as Election, Inflation Bring Unease

Investors remain confident in today’s market, with 60% expressing bullish sentiment in Morgan Stanley Wealth Management’s most recent quarterly survey of individual investors.

The firm found that the majority of investors were bullish on the market, with the other 40% bearish, according to the results released April 18. This was consistent compared to the prior quarter.

However, optimism regarding the economy has slightly waned among this same group, with only 53% believing that the Federal Reserve will be able to execute a “soft landing,” marking a 7% decline compared to Q4 of 2023.

The survey also highlighted mounting concerns among investors, particularly regarding inflation and the upcoming 2024 election. A majority (53%) expressed worries about inflation, representing a rise from the previous figure of 49%. Similarly, unease about the 2024 election increased to 31%, up from 26% in the previous quarter.

“The US stock market is coming off one of its strongest first quarters of the past 20 years, and so it should not be too large a surprise to see it pull back,” Chris Larkin, managing director, head of trading and investing, E*TRADE from Morgan Stanley, said in a statement. “Yet despite economic uncertainty amid the revised pace of rate cuts for the year, along with uncertainty around the 2024 election, investors remain optimistic about the market.”

In a sign that many investors still feel confident, fewer of them are inclined to adjust their portfolios, according to the survey. Half of the investors indicated that they intend to maintain their current positions for the next six months, a notable increase from the 42% reported in the previous quarter. Moreover, the proportion of investors planning to transition to cash stands at only 10%, down 4% from the first quarter of the year.

Furthermore, the survey explored investors’ sector preferences for the second quarter of 2024. Technology emerged as the leading choice, driven by sustained interest in chipmakers and artificial intelligence. Energy maintained its appeal as the second choice, buoyed by a resurgence in oil prices following signs of recovery from 2023. Lastly, health care emerged as a defensive option, securing the third spot with 36% of investor interest, potentially serving as a hedge against market volatility.

Morgan Stanley’s survey was carried out in April among 875 self-directed investors, those who fully delegated investment account management to financial professionals and investors who utilized both. The panel was 60% male and 40% female and self-selected as having moderate investing experience, with an even distribution across geographic regions and age bands.