The number one concern among retail investors at the moment is related to the slowdown of their domestic economies. This concern tops fear of inflation and the impact of geopolitical conflicts, according to eToro’s latest quarterly survey.

Investors’ Confidence Metrics Down

eToro’s survey for second quarter 2023 draws participation from over 10,000 retail investors scattered across 13 countries and three continents. Some of the participating countries include the UK, United States, Germany, France and Australia.

According to the survey report, economies across the world remained resilient during the year even as central banks hike interest rates to combat inflation. While this resilience contributed to the rally in stock prices this year, most retail investors no longer see a strong market opportunity.

The report noted that “retail investors are now bracing for a coming slowdown.” Accordingly, all metrics used by eToro to survey investors’ confidence all slumped during the quarter, with confidence about portfolio, the global economy, and domestic economy, declining by five percentage points to 71%, 40% and 45%, respectively.

“The threat of a home market recession surged to become the biggest perceived risk amongst global retail investors (18%), while far fewer saw inflation as the top risk (17%), or international conflict (12%),” eToro explained.

‘Retail Investors are Contrarian’

In addition, eToro explained that while retail investors were quick to buy stocks after the market bottomed out in October 2022, the majority “are now being contrarian again.” This means that most investors are not buying the ‘bull market narrative’. In fact, only 11% of surveyed investors believe the markets have entered another bullish period.

“[Retail investors] are running a two-pronged ‘barbell strategy’ of still-riding the tech winners and looking to scoop up some of the commodity and bank stock laggards,” eToro explained.

Regardless of these trends, eToro found that a significant number of retail investors (31%) topped up their investment portfolios over the last quarter, with only 12% saying they cut down on their investments. Similarly, while another 31% said they intend to allocate more funds to their investments over the next three months, about 11% plan to shrink their portfolio size over the same period.