DIY investors pessimistic about the outlook for the global economy

 DIY investors are pessimistic about the outlook for the global economy amid signs that the recovery is slowing in many major economies, new data from eToro reveals.

The social investing network’s latest Retail Investor Beat reveals that only 46% of investors are positive about the outlook for the global economy. The last time eToro asked investors this question at the end of September, 47% said they were confident and in June, investors were split 50% on the question.

47% of investors think inflation poses the biggest external risk, up from just 38% in June, while one in four (26%) think international conflict is a major external risk, up from 23% in June.

Yet the majority (56%) of retail investors are not repositioning their portfolios as a result, suggesting they are happy with their strategies despite this risk.

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eToro’s Global Markets Strategist, Ben Laidler, comments: “DIY investors’ weakening confidence in the global economy comes amid signs that the recovery is losing steam in the US, China and the UK and with central banks considering interest rate rises to battle inflation.

“The winds of change are clearly blowing through investment markets, as witnessed by the move away from riskier assets across global markets. With inflation, the state of home economies and international conflict all rising concerns for investors, there was always likely to be some adjustment.

“However, our data suggests the majority of retail investors are holding fast with their investment strategies for now. While certain risks are posed for markets in the year ahead and we’ve seen something of a pivot in recent days toward stocks that benefit from interest rate rises, there’s little indication that retail investors are beginning to significantly diverge from their strategies.

“Retail investors are, in effect, sticking to best practices for investing – avoiding selling at the first sign of turbulence and ensuring they have a thesis which thinks about the right long-term approach, not short-term gain.”

Inflation also remains the biggest concern among Romanian investors in the next 3 months – 53% (vs 51% Q3) followed by the Romanian economy (45%) and global economy (40%). Despite intensification of threatening political rhetoric in the region, the fear of international conflict decreased from 25% in Q3 to 22% in Q4.

Other issues concerning Romanian investors included increased/rising taxes (24%) and fears that the Romanian economy will get worse over the next 12 months. While 81% of investors declared that they are very confident in their job security and 77% are confident about their income and living standards, the Romanian economy’s positive developments lack the confidence of the Romanian investors, with 74% not being confident about it. 70% of the respondents believe that the National Bank of Romania will increase interest rates in 2022. In order to prepare for this, 28% declared that they repaid debt, 22% saved more and 19% purchased more crypto assets.  22% took no measure to protect from this event.

While 85% of Romanians are confident in their investments, 56% repositioned their portfolios to protect them from risks.

Globally, investors are also confident that the slowing economic recovery will not hit their investments, the data shows. 80% of investors told eToro that they were confident about how their portfolios will perform.

Ben Laidler adds: Our latest Retail Investor Beat suggests investors are confident in their investments despite the cloudy economic outlook. Over the past two years retail investors have stolen a march in many ways over their institutional competitors and seem to be allocating their investments shrewdly with an eye on future developments.

“Ultimately no one has a better handle on the situation ‘on the ground’ than an everyday investor who has to go to the supermarket to buy groceries or fill their car with fuel. The same logic extends to continued confidence in tech stocks such as Microsoft and Apple. These companies are used by everyone, every day, making them ‘defensive tech’ stocks which people believe will continue to be used even if the global economy is struggling.”