Investors' Optimism Climbs With Markets Hitting Record Highs

Investors' confidence in the stock market is growing as the S&P 500 and the Nasdaq reach record highs, with individual investors as optimistic about the stock market as they’ve been in the past 12 months, Investopedia’s latest investor sentiment survey found.

Nearly two-thirds of respondents describe their sentiment as “cautiously optimistic," or "optimistic," the highest levels of bullishness registered in the past year.

Close to 20% say they are putting more money to work in the stock market, and more than one-third expect returns of 5% or more over the next six months. About half of respondents say their portfolios are leaning "somewhat" to "very" risky, while 15% say they are making riskier investments in light of recent market events. Both of those categories increased slightly from early May.

Meanwhile, only 18% of respondents say they worry the market will fall 10% or more in the next three months, which is 7 percentage points lower than the last time we asked in April.

Putting Money To Work

While the S&P 500 has made over 30 new record highs so far this year, individual investors have been somewhat reticent to put new money to work in the markets, with net purchases of stocks and exchange-traded funds (ETFs) still relatively weak for this time of the year amid a slump in retail activity, according to Vanda Research. However, there are signs that individual investors are starting to get more involved, given recent fund flows into tech stocks and ETFs, according to Bank of America Research. Our respondents echoed that sentiment, as over one in four readers say they are actively investing more in ETFs and stocks.

What Would You Do With an Extra $10,000?

One of the truest measures of investor confidence in our bi-monthly survey is what respondents say they would do if they had an extra $10,000 to invest. Throughout the bear market of 2022, and the bull market recovery of 2023, investors preferred the safety of certificates of deposit (CDs) versus the perceived riskiness of stocks and ETFs. But, as of the first few months of 2024, respondents favored individual stocks over CDs, with ETFs as their second choice.

With the incredible rise of stocks like Nvidia (NVDA), which have helped propel the broader market higher, investors’ preference for individual equities for their hypothetical extra cash is little surprise.

What Are Investors Worried About?

The upcoming presidential election has remained one of our readers’ top concerns for several months running, with over half saying they are worried about the upcoming presidential election's impact on their portfolios.

Inflation is their second-highest concern, followed by persistently higher interest rates and U.S. relations with China. Climate disasters, while low on their list of worries, has been growing as a concern given recent floods and record heat waves. While investors’ list of worries is long, their enthusiasm for stocks continues to grow. 

Which President Will Deliver the Best Returns?

While history teaches us that whether a U.S. president is Republican and Democrat has little impact on stock market returns, 37% of respondents believe that Donald Trump, if elected again, will deliver better returns than President Biden, if reelected. Meanwhile, 27% of respondents believe a Biden second term would deliver better returns.

Under Trump’s term in office, from January 20, 2017 to January 18, 2021, the S&P 500 delivered a return of 69.6%, which included a 34% drawdown at the onset of the pandemic in the spring of 2020. Since President Biden took office in January of 2021, the S&P 500 has returned about 44%, including the bear market of 2022. 

While presidents can impact shareholder returns with tax policies and their handling of the economy, their impact on the stock market can be affected by external factors in the global economy, and whether or not their political party controls both houses of Congress. What may be more relevant for investors is the fact that election years typically deliver better returns than non-election years.

What’s in Our Portfolios?

Investopedia’s readers are pretty consistent when it comes to their portfolio holdings, and prefer to own widely-held, large-cap stocks with a concentration in the tech sector. Apple (AAPL), Nvidia, and Microsoft (MSFT) lead the list of stocks they hold, and these $3 trillion-plus giants have rewarded shareholders with their loyalty. Nvidia's market value, which briefly surpassed that of Microsoft and Apple to make the chipmaker the most valuable company in the world, has climbed tenfold since October 2022, before the release of ChatGPT gave way to the artificial intelligence (AI) boom that has boosted a number of tech stocks tied to the rapidly developing technology.

Big Stocks, Now and Forever

Not only do our readers cherish these mega-cap tech stocks today, they would choose the same top three stocks, NVDA, MSFT, and AAPL, to hold for the next decade. Tesla (TSLA), which is notoriously volatile and down 27% so far this year, remains in the top 10 on both lists. Berkshire Hathaway (BRK.A) and Costco (COST) also made the top 10 list for stocks to buy and hold for the next 10 years.

Methodology

This survey was fielded online to Investopedia readers 18+ living in the U.S. from June 13-17, 2024. Readers must currently hold and manage investments to qualify. Participation in the survey is entirely voluntary; sample composition reflects U.S. 18+ reader base.

• Age: 18-24 4% | 25-39 16% | 40-54 18% | 55-74 53% | 75+ 10%
• Region: South 35% | West 32% | Northeast 14% | Midwest 19%
• Gender: Man 83% | Woman 14% | Nonbinary or an identity not listed 0% | Prefer not to answer 2%
• Race/Ethnicity (multi-select): White 74% | Black or African American 6% | Hispanic, Latino or Latinx/Latine 7% | Asian 6% | Native Hawaiian or Other Pacific Islander 1% | American Indian or Alaska Native 1% | Middle Eastern or North African 1% | Another background 2% | Prefer not to answer 8%
  

CORRECTION—June 20, 2024: This article has been updated to correct a statement on findings from a Vanda Research analysis of net purchases of stocks and ETFs.