In a recent quarterly survey conducted by eToro, it was found that the primary concern among retail investors revolves around the slowdown of their domestic economies. This worry surpassed fears related to inflation and the impact of geopolitical conflicts. The survey, which encompassed over 10,000 retail investors across 13 countries and three continents, shed light on the sentiments prevailing among investors in the second quarter of 2023. Notable participating countries included the UK, the US, Germany, France, and Australia.
Despite central banks raising interest rates to combat inflation, the global economies showcased resilience throughout the year. This resilience has contributed to the surge in stock prices. However, many retail investors no longer perceive a strong market opportunity. According to the survey report, retail investors are now preparing themselves for an impending slowdown. Various metrics employed by eToro to gauge investor confidence experienced declines during the quarter. Confidence regarding the portfolio, the global economy, and the domestic economy dropped by five percentage points, settling at 71%, 40%, and 45%, respectively. (Read our comprehensive review of eToro)
eToro highlighted that "the threat of a home market recession surged to become the biggest perceived risk among global retail investors (18%), while far fewer identified inflation (17%) or international conflict (12%) as the top risks."
Furthermore, eToro noted that while retail investors were quick to purchase stocks after the market hit bottom in October 2022, the majority are now adopting a contrarian approach. This means that most investors do not believe in the "bull market narrative." In fact, only 11% of the surveyed investors believe that the markets have entered another bullish period.
Explaining this shift in strategy, eToro stated that retail investors are employing a "two-pronged 'barbell strategy'" by continuing to invest in successful tech companies while also seeking opportunities in underperforming commodity and bank stocks.
Despite the prevailing concerns, the survey revealed that a significant number of retail investors (31%) increased their investment portfolios during the last quarter, with only 12% decreasing their investments. Moreover, 31% expressed intentions to allocate additional funds to their investments over the next three months. Conversely, approximately 11% of respondents planned to reduce the size of their portfolios during the same period.
The survey conducted by eToro provides valuable insights into the sentiments of retail investors, highlighting their apprehensions regarding the slowdown in domestic economies. As these concerns overshadow worries about inflation and geopolitical conflicts, investors are adjusting their investment strategies accordingly to navigate the changing market landscape.
