If investor sentiment was a movie it would be 'Dazed and Confused'

Bearishness surges to five-year high says E*TRADE survey and we are definitely in a recession environment

If investor sentiment was a movie it would be 'Dazed and Confused'
Steve Randall

For experienced investors, there is little dispute: we are in a recession environment.

Eight out of ten respondents to a survey by E*TRADE Financial believe that to be the case, a surge of 59 percentage points quarter-over-quarter.

Bearish sentiment has also increased, jumping 23 percentage points to 62%, marking a five-year high. Six out of ten investors said they expect the market to fall this quarter, up 35 percentage points compared to January.

Asked to choose a movie title that sums up their current feelings, ‘Dazed and Confused’ was the top choice (31%) after rising 14 points quarter-over-quarter; followed by ‘Apocalypse Now’ (21%) which rose 21 percentage points to an all-time survey high.

Recession greater concern than COVID-19
Recession (54%) is the top portfolio risk cited by respondents, with the COVID-19 coronavirus pandemic second (44%), and volatility third (27%).

In the previous quarter, trade tensions were the top risk (44%).

“Against this unprecedented backdrop, it’s critical not to lose sight of long-term financial goals—while the duration of the pandemic remains unknown, it will eventually pass,” said Mike Loewengart, managing director of Investment Strategy at E*TRADE Financial. “As the real effects of COVID-19 magnify and the media is awash with dramatic predictions, investors can get spooked and make rash decisions. History has shown that those who avoid trying to time the market tend to emerge in a stronger position.”

Sector opportunities
Loewengart added that investors should be re-evaluating their risk tolerance and ensure their portfolios are aligned with their circumstances.

Unsurprisingly, the StreetWise poll shows that investors favour healthcare investments currently (58%), especially those firms involved in potential COVID-19 vaccines and treatments.

Consumer staples (42%) is also in focus as ‘stay-at-home’ stocks look attractive. Tech is also a strong contender amid historically-low valuations for typically high-priced names.