New research from London-based Finimize finds that despite a difficult economic 2023, many investors are not only optimistic about this year, but are willing to take their money off the sidelines and start investing again.
As part of its quarterly Modern Investor Pulse survey last month, the financial information platform spoke with 2,300 U.S. and U.K. retail investors and found they have a positive outlook on the future, including 78% who said they are anticipating that interest rates will either decrease or remain the same. In addition, 75% predicted the global stock market will increase within 12 months, which is up from 67% of those surveyed the previous quarter, the study found.
Those who participated are not just expressing their optimism but willing to demonstrate it as 40% said they plan to invest more in the next three months. Of that, 18% said they will be adding additional risk to their portfolio while 58% said they will keep their risk levels the same.
Carl Hazeley, chief analyst at Finimize, said he is unsure if investors are optimistic because they are investing more, or they are investing more because they are optimistic.
“The reason I’m taking it with a pinch of salt is you’re not quite sure whether it’s the tail wagging the dog or the dog wagging the tail,” he said. “At the same time, the last time investors were particularly optimistic, it wasn’t a bad thing.”
In terms of investments, investors are continuing to gravitate toward ETFs as they look for options beyond mutual funds and traditional stocks.
“It’s a continuation of the post-pandemic trend where we had a couple of tough years where retail investors weren’t necessarily capitulating and taking money off the table, but they were shifting from single stock bets to more diversified ETFs,” Hazeley said.
One area that appears to be cooling off is cryptocurrency, according to the study. Only 20% of those surveyed said they plan to invest in crypto in 2024, which is down from 37% a year ago, the study said. In addition, another 20% said they have reduced their crypto allocation.
Despite those numbers, retail investors are optimistic about the future of crypto as 56% said they believe that the bitcoin price will be higher in the next 12 months. Hazeley shares that optimism saying there are a few factors that could lead to a resurgence in the crypto markets.
“While the potential for falling interest rates in 2024 could encourage some investors to increase their crypto allocations, any regulatory approvals for new cryptocurrency investment products might prove the bigger positive catalyst,” he said.
Even though retail investors are gaining confidence in the markets overall, they are still concerned about geopolitical events both internationally and domestically. Wars in the Middle East and the Ukraine are making retail investors nervous.
Major pending elections in both the U.K and the United States could also have a dramatic impact with the U.K expecting a major election within the next year and the U.S. having its presidential election in November. The ramifications from the U.S. election could have a bigger impact than the ones in the U.K., according to London-based Hazeley.