Confidence among retail investors in the US market is on the rise following two quarters of decline, as reflected in a recent survey that sampled 10,000 retail investors from 12 countries. The results reveal that 38% of these investors now believe the US offers the best potential for long-term returns, a notable increase of 12% from the previous quarter. This shift reverses earlier declines, where confidence had dipped by 9% and then 17% in the first two quarters of the year.
This renewed optimism is mirrored in portfolio allocations, with 43% of investors holding positions in the US market. This marks an 8% increase compared to the last quarter and is the highest percentage recorded since the survey began in early 2023.
Despite this increasing confidence, there is a growing sense of caution among investors regarding the so-called “Magnificent 7” technology stocks: Amazon, Apple, Microsoft, Meta, Tesla, Nvidia, and Alphabet. Only 13% of respondents anticipate that these stocks will dramatically outperform the market by 2025, with a further 33% expecting slight outperformance. Additionally, there is a modest uptick in the number of investors planning to reduce their exposure to these companies. Tesla, in particular, has seen a 6 percentage point increase in the proportion of investors who are either not invested or do not plan to invest in the company.
Attention is also being paid to the outlook for the US dollar. Half of the respondents indicated they have either adjusted or are considering adjustments in their portfolios due to potential long-term weakness of the currency. Nevertheless, a significant majority—83%—believe the US dollar will maintain its role as the global reserve currency over the next decade, with only 7% foreseeing a loss of this status. Other currencies like the Chinese yuan, euro, gold, and even central bank digital currencies are mentioned as possible alternatives.
Investors seem to be navigating the balance between diversification and recognizing that long-term growth opportunities remain largely dependent on the US market. Concerns over a global recession have also diminished, with only 23% of investors citing the global economy as the greatest risk to their portfolios, down from 26% in the prior quarter. Inflation remains a key concern, being the second most frequently cited issue at 19%.
Interestingly, perceptions of domestic economic risks have risen, with 14% of investors now identifying their own country’s economy as the most significant threat, up from 11%. Among US investors, this concern is even more pronounced, with 28% expressing it as their top concern.
In summary, while retail investors are showing renewed confidence in the US market after a period of decline, they are proceeding with a level of caution regarding major technology investments and ongoing economic uncertainties. The outlook for the US dollar as a reserve currency remains strong despite possible challenges, and there seems to be a clear acknowledgment among investors of the ongoing importance of the US market in their investment strategies.