'Dazed and confused' investors are feeling the most bearish since the pandemic began as surging inflation and market volatility dent confidence, E-Trade says
- Investors hold the lowest rate of bullishness toward stocks in more than a year, according to E-Trade.
- Inflation tops the list of concerns held by investors in the online broker's fourth-quarter Streetwise survey.
Investor enthusiasm toward stocks has dropped for the first time since the COVID-19 crisis unfolded in the US last year as inflation soars to multi-year highs, but the leap in gas and oil prices makes the energy sector more attractive, according to a quarterly survey from E-Trade.
Bullish sentiment has slid by 11 percentage points to 54%, a pullback from the third quarter when such sentiment hit a three-year high, the trading platform said about its fourth-quarter Streetwise survey. The impact of inflation on investment portfolios was the top concern among respondents to the online survey that ran from October 8 through October 16, at 52%.
The latest round of E-Trade's questions included: "If you had to pick a movie title that best describes how you personally feel about the market this quarter, which would it be?" The top answer, at 27%, was "Dazed and Confused," the 1993 coming-of-age comedy whose cast included Ben Affleck and Matthew McConaughey.
"Investors are facing several headwinds when it comes to their portfolios, so it's not too surprising to see bullishness take a big hit," said Mike Loewengart, E-Trade's managing director of investment strategy, said in a statement Monday accompanying the survey's release.
Inflation has been scaling higher in recent months, with retail and wholesale prices under pressure in part from supply-chain snags running through numerous industries and labor shortage even as millions of Americans remain unemployed in the wake of the coronavirus outbreak. Labor shortages have forced many companies to raise wages to attract workers.
"Many are questioning if inflation is here to stay, supply constraints have weighed heavily on purchasing power, and slowing growth prospects seem to be more of a reality," Loewengart said. The consumer price index in September climbed to 5.4%, sticking around a 30-year high, and wholesale inflation soared to 8.6% year-over-year.
Investors at a 66% rate foresee a pick-up in market volatility over the next quarter, an increase from 64% in the previous quarter.
"But investors should keep in mind that volatility is part of a healthy market and preparing for pullbacks is key."
In such preparation, two in five investors, or 44%, said the energy sector has the biggest potential for gains, up from 37% in the third quarter. High demand from re-openings and supply shortages, said E-Trade, have contributed to gas pump prices climbing to seven-year highs. US and Brent crude oil prices have pushed up to around three-year highs, trading above $83 a barrel and $85 a barrel, respectively.
Investors also see opportunities from the information technology and health care sectors, the online broker said. The S&P 500 energy sector has surged by 90% in 2021.
E-Trade's survey, administered by online market research firm Dynata, had an online US sample of 901 self-directed active investors who manage at least $10,000 in an online brokerage account. The margin of error was plus or minus 3.2%.
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