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Investors are slowly getting used to market realities

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

The US stock market’s recent recovery from mid-June lows could ease their anxiety, combined with energy prices easing from recent highs. In addition, the Federal Reserve’s interest rate hike last week, which was well-announced by telegraph, was taken in stride by investors who bid higher in the stock market following the announcement.

While the stock market may have stabilized for now, more than 40% of our readers still believe it will trade lower over the next three to six months. Meanwhile, 37% of our readers believe the stock market will trade higher over the next three to six months, with 5% predicting returns of 10% or more. The almost equal split between our readers and their market forecasts indicates general uncertainty in the capital markets.


While sentiment among institutional and individual investors remains subdued overall, both groups are slowly returning cash to US equity markets. Individual investor purchases of popular technology stocks reached their highest level since 2014 in late July, according to Vanda Research. However, one in three of our readers who responded to the survey say they are investing less than usual, given their concerns about their portfolios. Only 21% say they are investing more.


What worries investors now?

The list of concerns for investors is long, but it has remained fairly constant throughout 2022. Inflation tops their list of worries, followed by a potential recession, geopolitical uncertainty and rising interest rates. These were all dominant themes related to the development of the global economy and capital markets this year. At the bottom of their list are the spread of new variants of COVID-19 and deflation.


What do investors do with their money?

While some intrepid investors are pouring money into the stock market, those who are not are still waiting for new signs of smooth sailing. One in three respondents to our survey say they are investing less, with 62% saying they think the stock market has yet to fall before they feel comfortable. 43% say they fear a recession will affect the market, and for now they are dismissive.


On the other hand, 56% of our readers say they “buy the dip,” while only 23% say they sell the stock and make a profit. Only 12% reported selling shares at a loss.


Our readers have been pretty consistent over the past two and a half years when it comes to their favorite stocks. Most of our readers across all age groups continue to favor large-cap technology and consumer goods stocks like Apple, Microsoft, Amazon and Alphabet. Tesla dropped out of the top ten in this round of the survey, replaced by Exxon-Mobil, one of the best-performing stocks in the S&P 500 for 2022.

What about Crypto?

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


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