U.S. retail investors remain in the market but are holding off on deploying additional capital until they see concrete signs of economic improvement, according to the latest Retail Investor Beat survey from trading platform eToro. The findings come against a backdrop of gradually cooling but still-elevated inflation and a Federal Reserve that has held its benchmark interest rate at its highest level in over two decades, leaving many individual investors in a wait-and-see stance.

The survey, which polled 1,000 U.S. retail investors, found that 40% identified stronger economic growth combined with lower inflation as the primary catalyst that would prompt them to increase their investments. Lower interest rates ranked second at 29%, followed by reduced political and global uncertainty at 27%, and more attractive stock prices following a market pullback at 26%. Only 8% of respondents said they currently feel fully confident about investing in stocks — a strikingly low figure given that major U.S. equity indices have traded near record territory through much of 2024.

Bret Kenwell, eToro's U.S. Investment Analyst, noted that investors are not panicking but are exercising greater caution about where they allocate their cash. He said investors are seeking a combination of favorable economic indicators and reduced uncertainty before committing additional funds to the market.

Inflation remains the leading concern, with 26% of investors citing it as the biggest threat to their portfolios — up from 22% in the previous quarter. That apprehension persists even as the Consumer Price Index has moved meaningfully lower from its 2022 peak, suggesting retail investors want more sustained evidence of disinflation before adjusting their strategy. Fear of a recession ranked second at 22%, while concerns about the broader global economy came in at 12%.

Despite these worries, 68% of respondents believe they remain on track to meet their financial goals, and many intend to continue investing consistently rather than attempting to time market peaks and troughs. Approximately 29% said they invest automatically on a regular schedule, a discipline that financial advisors have long recommended for managing volatility.

Looking ahead, investors indicated plans to increase allocations to cash, growth stocks, high-yield bonds, and commodities over the coming year. The preference for cash aligns with money market funds and high-yield savings vehicles offering yields not seen since the pre-2008 era, creating a competitive alternative to equity exposure for risk-averse investors.

Among UK respondents, 81% of retail investors expressed confidence in their investments, while only 35% felt confident about the UK economy. Additionally, the survey found that millennials are increasingly willing to buy into the market after smaller pullbacks, with 32% prepared to invest following a 5–10% decline, compared to 26% one year ago.

Source: LeapRate