Investors Getting More Bullish on Stocks as They Anticipate Fed Rate Cuts, Survey Shows

Individual investors are getting more bullish, thanks in part to expectations of Federal Reserve interest rate cuts, according to a survey by Morgan Stanley.

Morgan Stanley’s latest individual investor pulse survey found 60% of respondents said they were bullish on the market this quarter, an increase of 9 percentage points from the fourth quarter of 2023.

Sixty percent also said they believed the Fed will be able to execute a “soft landing” for the economy, and nearly as many (58%) thought the economy is healthy enough for an interest rate reduction.

Chris Larkin, managing director and head of E*TRADE trading and investing at Morgan Stanley, said the surge in sentiment was not surprising, considering that the Fed has been signaling it will cut borrowing costs this year. However, Larkin added that with “relatively muted” stock market performance at the start of 2024, investors “may need to be patient with when these cuts will actually take place,” warning that with economic data remaining strong, policymakers may not be in a hurry to act.

The survey showed a plurality of investors (42%) said they wouldn’t be making any changes in their portfolios over the next six months, while 26% said they will. Just under one-fifth (18%) plan to move out of cash into new positions.

Inflation was their top concern for their portfolios, with 49% reporting it’s their biggest worry, followed by this year’s presidential election (26%), and a potential recession (24%).