Vanguard's Investor Pulse survey has found sentiment among investors for U.S. equities rising to its highest levels in two years, a trend that follows a surge in stock prices that began in early November.

The effects of the bull market and strong economy last year “have overshadowed concerns about interest rate hikes and a possible recession,” Vanguard said in a late January press release. The Malvern, Pa.-based investment complex added that the recent jump in equity prices was reminding “investors of pre-pandemic times and buoying hopes entering 2024.”

The pickup in optimism is causing investors to raise their return expectations for the next 12 months to 5.7%, Vanguard said. That’s 1.3 percentage points more than it was in October, and more than twice the return of 2.7% that investors expected for 2023 at the end of 2022, according to the release. For all of 2023, the S&P 500 returned 26.3%.

“Investor expectations for stock returns over the long run (defined as the next 10 years) rose slightly to 7.2%,” the release said. “That’s higher than Vanguard’s 10-year forecast, which ranges from 4.2%-6.2%.”

When it comes to the U.S. economy, investors’ expectations for average GDP expansion over the next three years was flat for most of 2023 but “rose sharply to 3.5% in December,” the release said. Vanguard added that this figure was “among the highest levels observed” in the survey’s history.

The "upswing in optimism echoes sentiments last witnessed in 2022, just before rate hikes and recession fears kicked in.”