Investors Are Still Bullish on the Stock Market, Morgan Stanley Survey Finds

Investors are optimistic about the stock market and expect to see more gains in the third quarter, according to a recent survey.

A survey from Morgan Stanley Wealth Management released Wednesday found that more than half of respondents, or 59%, anticipate that the equities market will rise in the third quarter. The online survey reflected the responses of nearly 900 self-directed investors collected since the start of the month.

Some 61% of respondents consider themselves bullish about the quarter, the survey reported, about in line with a quarter earlier.

The market has been strong in the past year, lifted in part by of enthusiasm about artificial intelligence (AI)-related shares and tech stocks broadly. Asked which sectors had the most potential in the third quarter, survey respondents remained bullish on tech, with with 57% of respondents citing it as one of those with the top potential—up from the second quarter. Energy was mentioned by nearly half.

The S&P 500 has generally risen to start the second half, though it’s off recent highs.

Investors Worried About the Economy, Politics

Respondents to the Morgan Stanley survey remained uncertain about the economy and the political climate. Investors’ top concerns were inflation (54%), the 2024 election (34%), market volatility (22%), and a potential recession (20%). 

Although inflation has eased recently, it still remains above the Federal Reserve’s 2% target. The Fed has indicated it will reduce its benchmark rate as inflation cools, but it’s uncertain when that will happen. Just 13% of respondents said they think the Fed will start lowering rates this quarter, while 41% said they believe it will wait until the fourth quarter to ease rates. 

According to the CME Group’s FedWatch Tool, traders see a roughly 98% probability that the Fed will cut rates at its September meeting. The tool forecasts rate movements based on fed funds futures trading data.