Retail investors are regaining confidence in the US market after two quarters of decline, according to the latest quarterly Retail Investor Beat survey from trading platform eToro.
The survey, which covered 10,000 retail investors across 12 countries, found that 38 percent now view the US as the region with the strongest long-term return potential. This marks a 12 percent increase from the previous quarter, reversing consecutive declines of 9 percent in the first quarter and 17 percent in the second.
Portfolio allocations reflect the same trend, with 43 percent of investors now holding exposure to the US market, an 8 percent rise from the prior quarter and the highest level since the survey began in early 2023.
Caution Toward the Magnificent 7
“Now, as confidence in the resilience of the US economy improves, we’re seeing a reversal of that trend,” eToro’s Global Market Strategist Lale Akoner, commented.
“Portfolios are once again tilting back toward the US, reflecting recognition that, despite global diversification, the American market remains the cornerstone of global investing,” Akoner, added.
At the same time, retail investors are showing more caution toward the so-called Magnificent 7 technology stocks, which include Amazon, Apple, Microsoft, Meta, Tesla, Nvidia, and Alphabet.
Thirteen percent expect these stocks to significantly outperform the market in 2025, while 33 percent expect slight outperformance.
You may find it interesting at FinanceMagnates.com: 27% of Retail Investors Shift Away from Big Tech Giants: eToro Survey.
The number of investors planning to reduce exposure has grown modestly across all seven companies compared with a year earlier. Tesla saw the largest change, with a 6 percentage point increase in the share of investors not invested or not planning to invest.
US Dollar Holds Reserve Currency Status
Retail investors also remain attentive to the outlook for the US dollar. Half of respondents reported they had adjusted or were planning to adjust their portfolios for possible long-term weakness.
However, 83 percent believe the dollar will retain its position as the global reserve currency over the next 10 years. Only 7 percent expect it to lose that status, with bitcoin, the Chinese yuan, the euro, gold, and central bank digital currencies cited as possible alternatives.
Read More: Retail Investors Confident about Portfolio despite 2022 Bear Market.
“Retail investors are effectively balancing diversification with a clear acknowledgment that long-term growth opportunities are still heavily anchored in the US,” Akoner, noted.
Recession Fears Ease, Domestic Risks Rise
The survey further indicated easing fears of a global recession. Twenty-three percent listed the global economy as the top risk to their portfolios, down from 26 percent in the previous quarter.
Inflation remained the second most cited concern at 19 percent. Meanwhile, the share of investors viewing their domestic economy as the biggest threat rose to 14 percent from 11 percent, with US investors showing the highest level of concern at 28 percent.