Market: Stock market investors now fear a recession more than inflation

(BFM Bourse) – The prospect of a recession has overtaken inflation as the main concern of retail investors around the world, according to data from the latest quarterly eToro barometer.

One worry chases another. The eurozone economy is increasingly showing signs of weakness. Moreover, the European Commission lowered its growth forecast for the euro zone in 2023 in mid-September, mainly due to Germany’s difficulties.

These unappealing prospects are fueling the fears of individual investors, according to the latest study by broker eToro conducted among 10,000 individual investors in 13 countries.

. More than a fifth of those surveyed (22%) said they view the state of the economy and a potential recession as the biggest risk to their investments, while 13% would be more concerned about inflation .

Source: eToro

“A significant turnaround”

The broker notes that this is a “significant turnaround” from responses given six months ago, when inflation was the number one concern (20%) and recession fears were still at the bottom of the list. list (13%).

It must be said that the rise in prices is slowing down in most euro zone countries. In Germany, inflation fell in September to 4.5% year-on-year to its lowest level since February 2022, the month of the outbreak of the Russian war in Ukraine. In France, inflation stabilized at 4.9% year-on-year in September, while a small surge to +5.1% was feared by economists.

Data from eToro’s Quarterly Private Investing Barometer also shows that while a potential recession is now the biggest perceived threat to investment portfolios, it is not weighing on investor sentiment.

“When retail investors were asked about their level of confidence in different aspects of life over the past three months, all confidence indicators increased,” notes eToro. Thus, the share of people who are confident in their investment portfolio increases, from 71% in June to 78% today, while those surveyed who are optimistic about their income and their standard of living have increased from 65% to 70% during the same period.

The pessimistic French and Spanish

Confidence in investments has increased uniformly across all countries, the broker also notes. This optimism particularly won over Dutch retail investors (91%), while Spaniards obtained the lowest confidence score (71%).

As for the French, although they remain among the most pessimistic (75%), their confidence score has returned to the level observed 6 months previously, specifies eToro. Proof that the fall in the second quarter was only temporary.

“Retail investors are no longer focused on inflation, which led to a significant drop in confidence in the second quarter. Their concerns have shifted to the recession that interest rate increases could cause, but this is weighing less on their sentiment which recovered in the third quarter”, comments Antoine Fraysse-Soulier, head of market analysis for eToro.

Health is the big winner from renewed confidence

The renewed confidence linked to investments is also reflected in an increase in the amounts invested. According to eToro barometer data, a third (33%) of those surveyed plan to increase the amount of money committed over the next three months, with this panel being more than four times as numerous as those who plan to reduce them. (7%).

In France, it is the healthcare sector that is most likely to benefit from this renewed optimism, according to eToro, since a growing number of respondents are ready to invest in this sector. There are now 11% who want to invest in this sector compared to 9% in the second quarter.

On the other hand, the real estate sector is much less popular. Favorite investment sector of the French, 15% of them say they are ready to invest in real estate this quarter compared to 19% the previous half-year.

“Real estate is the first sector to experience a decline in popularity. As a favorite investment sector of the French for several years, this decline in popularity is primarily explained by a surge in credit costs due to rising interest rates. That said, given the risks of recession, investors remain on the lookout for a probable drop in prices,” adds Antoine Fraysse-Soulier.

And the real estate sector is not the only one to attract fewer investors, the energy and financial services sectors are also neglected…