For all the financial anxieties investors reported for the first six months of 2023, many are now showing a calmer sentiment heading into the second half of the year.
A quarterly individual investor pulse survey by Morgan Stanley Wealth Management reports that over half (54%) of investors believe that inflation will reach normal levels by the end of the year, up four percentage points quarter over quarter.
Another 54% believe the Federal Reserve will navigate a “soft landing”—an increase of seven percentage points from Q2—while 48% believe the economy is healthy enough for the Federal Reserve to add rate hikes this quarter, a three-percentage point increase since Q2.
The Morgan Stanley Wealth Management report shows that investors are optimistic about the market. Over half (55%) of investors say they are bullish and 58% even predict a rise in the market, up 10 percentage points compared to Q2.
“Despite a recent market rise, investor uncertainties abound,” said Mike Loewengart, head of Model Portfolio Construction for Morgan Stanley Portfolio Solutions, said in a statement. “We’re beginning to witness a slow shift happening in the investing landscape as we narrow in on the potential end to the Fed’s rate hike campaign.”
Still, inflation and market volatility remain leading concerns for investors, Loewengart said. Fifty-two percent of respondents in the Morgan Stanley study listed high inflation as a top concern when it comes to their portfolio, followed by a recession (31%), and market volatility (26%). Ninety-one percent of investors also believe that volatility will increase or stay the same, up two percentage points since last quarter.
“Inflation is still very much a part of the conversation and should factor into long-term investing decisions,” added Loewengart. He notes that investors should consider diversified portfolios to ensure they can overcome the market, no matter what condition.
“That said, for those who were enticed to move into cash over the last year or two, consider the purchasing power risks,” he continued. “Investors are missing out on capital appreciation if they’re sitting on the sidelines, and most cannot time the market. Bottom line, maintaining a diversified portfolio across asset classes and investments provides the fundamental framework for a long-term investing strategy and can help weather all market conditions.”
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.