It’s no surprise, sticky high inflation, rising rates, recession fears and more bank failures have spiked investor cautiousness to the highest levels seen this year, according to Investopedia’s latest survey of daily newsletter readers.
Nearly one quarter of respondents say recent events have prompted them to change their approach to their investments, and even more say they are at least “somewhat worried” about their money. One in three respondents said they expect a decline of 10% or more in the stock market in the next three months, which represents the highest level of pessimism seen all year.
If concerns about persistent inflation and the Federal Reserve’s ongoing rate-hiking battle to curb it weren’t enough, investors have had to contend with recent bank failures to add to their uncertainty. While the failures of Silicon Valley Bank, Signature and now First Republic Bank are not our readers’ top concern, they have added yet another element of uncertainty to recent market dynamics. Inflation, a looming recession, U.S. relations with China and rising interest rates did top the list of their concerns, as they have all year.
Nearly half of respondents say they believe a recession is likely by the end of this year, the highest percentage to indicate that since last November. That is prompting almost 20% of respondents to invest less in the stock market lately, while only 17% say they are investing more. Nearly 30% expect the stock market to decline at least 5% from current levels over the next 6 months.
Higher Rates Prompting Fear, and Opportunity
While rising interest rates are among our readers top concerns, half of our survey respondents say they are using them to their advantage and turning to safer, yield-producing investments like CDs. In fact, Certificates of Deposit topped the list of investment products our readers are leaning into more, for the first time since we began our bi-monthly surveys, with 35% indicating they are buying them now.
With yields on CDs and money market funds topping 4% amid stock market uncertainty, it’s not a surprise to see their rise in popularity. Investors are also leaning into bonds more aggressively, which topped ETFs and individual equities in our latest survey.
In fact, if respondents were given an extra $10,000 to invest today, CDs now match stocks for where they’d put it. This is notable given that our readers tend to be active individual investors who mostly buy single stocks. Only 2% say they would buy cryptocurrency with that extra money. Despite the fact that Bitcoin has returned over 80% so far this year, it still feels risky to the overwhelming majority of readers.
Money in the Bank!
While CDs have grown in popularity over the past several months, investors are also taking advantage of high yields in savings accounts. The competition among banks to attract investors and savers has been intense lately, and companies like Apple and Robinhood have joined the fray, offering yields north of 4%. Despite the concerns around regional banks amid recent bank failures, 25% of respondents said they opened a high-yield savings account in the past 6 months, 20% said they are considering it, and 28% say they are adding to their existing account. This, despite the fact that 46% say those recent bank failures have eroded their trust in financial institutions.
Our readers are pretty faithful to their favorite stocks, and the list of our survey respondents’ top ten equities has remained fairly consistent since we began this process more than two years ago. That list, topped by Apple (AAPL) and Microsoft (MSFT), the two most-widely held stocks in the world, also contains several other tech and consumer-oriented stocks. New to the list in this round, however, is chipmaker Intel (INTC). Shares are up 17% so far this year, but down 33% over the past 12 months.
Not Ready for the Robots
While investors may be cautious about their investments today given all of these concerns, most of our readers say they are not even close to ready to let artificial intelligence programs make their decisions for them. 50% said they would not make investment decisions based on generative A.I., while only 7% said they would. More than a third, however, are keeping an open mind about it.