The Casual Investor Survey Results Are In, And Your Glass-Half-Empty Outlook Might Be Just What Stocks Need

The Casual Investor Survey Results Are In, And Your Glass-Half-Empty Outlook Might Be Just What Stocks Need
Andrew Rummer

over 2 years ago4 mins

  • After a steady three months for global stocks, you’ve become notably less optimistic about the outlook for markets, company earnings, and the economy – although this is arguably a contrarian signal that the current bull market has a little further to run.

  • Despite this, inflation is still among Finimizers’ top fears for markets – potentially heralding a period of disastrous stagflation.

  • You’re all still deeply in love with bitcoin and crypto, and an impressive 8% of you have bought an NFT.

After a steady three months for global stocks, you’ve become notably less optimistic about the outlook for markets, company earnings, and the economy – although this is arguably a contrarian signal that the current bull market has a little further to run.

Despite this, inflation is still among Finimizers’ top fears for markets – potentially heralding a period of disastrous stagflation.

You’re all still deeply in love with bitcoin and crypto, and an impressive 8% of you have bought an NFT.

Our latest Casual Investor Survey polled Finimizers’ opinions on a range of investing topics to coincide with the end of the third quarter. And while it’s clear that you’re nowhere near as bullish as you were when we ran our last survey back in June, that alone could suggest there’s further for this stock market rally to run… 

What does this Casual Investor Survey show?

153 of you completed this survey – the third such one we’ve done – between September 27th and September 30th (full results here), and the first thing that jumps out is how much optimism has cooled. 

A net 28% of you now think the economy will be stronger a year from now, down from 70% in June and 66% in March (note that we use “net” percentages – the difference between the percentages of positive and negative responses – so we can compare one survey against another). Optimism around company earnings has fallen off a cliff too. 

What’s particularly intriguing is that these declines haven’t been accompanied by a similar drop-off in inflation expectations. Inflation, growth, and company profits often move hand in hand, so a divergence like this – summarized in the chart below – reeks of dreaded stagflation, when economic stagnation combines with high inflation. Fingers crossed you’re all wrong on that one, because it can create a world of pain for investors. 

Net proportion of respondents saying inflation, economic growth, or company profits will be higher in 12 months
Net proportion of respondents saying inflation, economic growth, or company profits will be higher in 12 months

That weakening optimism on the economy and corporate profitability is mirrored in your views on stocks. Just a net 29% of Finimizers now expect global stocks to be higher in 12 months, down from 67% in the last survey.

At the same time, you’re becoming much more bullish on bitcoin, with a net 44% of you expecting bitcoin to be higher 12 months from now. That number’s up from 27% in June, even though the OG cryptocurrency has climbed 26% over the course of the third quarter. 

Net proportion of respondents saying stocks or bitcoin will be higher in 12 months
Net proportion of respondents saying stocks or bitcoin will be higher in 12 months

What’s more, a surprisingly high proportion of you – 8% – said you’ve bought a non-fungible token (NFT), the blockchain-based collectibles that have been taking a sector of the crypto market by storm in recent months. 

Where are people investing?

Crypto is still sitting pretty at the top of our survey’s list of the most-crowded trades. When asked “Where do you see others investing their money most often at the moment?”, 37% of you answered crypto – up from 33% in June and 25% in March. 

Meanwhile, interest in tech stocks seems to be cooling. The proportion of you saying tech or growth stocks are the most crowded trade dropped to 5% from 11% in June and 17% in March. Real estate and value stocks seem to have followed the reverse pattern: they’ve climbed from very low levels earlier in the year – perhaps a sign that people are tilting their portfolios toward more inflation-resistant assets. 

Responses to “Where do you see others investing their money most often at the moment?”
Responses to “Where do you see others investing their money most often at the moment?”

And what risks do Finimizers see on the horizon?

One of the biggest changes we’ve seen since we first conducted this survey is in the risks that people see for markets. In the six months since March, Covid-19 has dropped from the top spot in the list of worries to just third place. Let’s hope it keeps dropping down the list in future surveys…  

Storming in from nowhere to take the No.1 title is China – specifically, worries that massive property developer China Evergrande might trigger a debt crisis in the fastest-growing major economy. Perhaps it’s not so surprising that so many of you are concerned, mind you: it’s been almost impossible to look at any financial news in the past few weeks without being confronted by scary headlines.

Responses to “What’s the biggest risk for markets at the moment?”
Responses to “What’s the biggest risk for markets at the moment?”

What’s the opportunity here?

There’s a famous investing idea that, “bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”

So the fact that the market didn’t die of the euphoria of earlier this year and has instead been replaced with moderation – global stock markets have barely been moving, and even crypto markets have been fairly quiet by their own hyperactive standards – actually gives me hope there might yet be further legs in this year’s stock market rally. Equally, the continued slide of the worst global health crisis for a century down your list of concerns could also been seen as a good omen. 

But if you think we’re in for a serious crisis in China or a sustained bout of stagflation, remember that professional investors tend to use these sentiment surveys as “contrarian” indicators. In other words, if people are over-excited about a certain part of the market, it could – so the thinking goes – be due for a pullback. And the reverse is true too: it could be a sign of a market that’s due for a rally if people are overly pessimistic.

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