Online broker eToro today published key findings of its latest ‘Retail Investor Beat’ survey.
The survey shows majority of retail investors are shrugging off the downturn that has gripped financial markets for more than a year. When asked what impact the bear market has had on their mindset, 67% are either positive or ambivalent, while the remainder (33%) say their investing appetite has been dented to some extent.
The data shows that it is older investors with shorter retirement time horizons who are feeling the strain the most. Three in four (76%) 18-34-year-olds feel positive or indifferent about the downturn, whilst this drops to 60% amongst over-55s. Across all age groups, the younger the investor, the more upbeat they are about the bear market.
There has also been an uplift in sentiment, with 69% feeling confident about their portfolios. Whilst still a relatively low figure compared to past Retail Investor Beats, it is a five percentage point quarter-on-quarter increase, while confidence in other areas of life such as income and job security also improved.
One explanation for this is that the perceived threat of inflation – considered the biggest investment risk in six of the last seven quarterly surveys – is gradually falling. At the end of Q3, 24% saw inflation as the single biggest threat to their portfolio over a three-month period, with this dropping to 22% at the end of Q4. When asked about the biggest risk across the whole of 2023, those citing inflation dropped to 19%, with more (22%) seeing a global recession as the main threat.
In preparation for this recession risk, many are adjusting their portfolios defensively whilst also preparing for future opportunities. The proportion holding cash assets (e.g. savings account) jumped from 46% in Q3 to 69% at the end of Q4 – a 50% increase. Meanwhile two traditional defensive sectors – healthcare and utilities – both saw a 4 percentage point rise in those invested in them, while other defensive plays in the current climate – staple consumer goods and energy – saw a 3 percentage point rise.
Ben Laidler, Global Markets Strategist at eToro, commented:
“Investors endured a torrid 2022 but sentiment has turned upwards with many feeling more reassured by the inflation signals they’re receiving.
However they will also be well aware that most experts are predicting at least a mild global recession, and many are repositioning accordingly, with more looking into defensive stocks. There was also a significant dash for cash in the final quarter as banks around the world continued to pass on better rates to savers, albeit slowly, and investors kept some powder dry for market opportunities ahead.”
