Investors Are Bullish, but Inflation Remains a Top Concern: Morgan Stanley Survey

Fifty-four percent of U.S. investors surveyed in the third quarter believe that inflation will reach normal levels by the end of 2023, up from 50% in the second quarter, Morgan Stanley Wealth Management reported this week.

The firm’s quarterly investor pulse survey found that the same percentage of respondents expect the Federal Reserve Board to navigate a soft landing, up from 47%, and 48% consider the economy healthy enough for the Fed to enact additional rate hikes this quarter, up from 45%.

More than half of respondents are bullish about the third quarter, with 58% believing the market will end in the green, 10 percentage points higher than last quarter.

Still, 52% of investors surveyed said high inflation is their chief concern regarding their portfolio, followed by 31% who said they worried about a recession and 26% about volatility. Nine in 10 respondents believe that volatility will increase or stay the same this quarter, a slight increase over the second quarter.

“We’re beginning to witness a slow shift happening in the investing landscape as we narrow in on the potential end to the Fed’s rate hike campaign,” Mike Loewengart, head of model portfolio construction for Morgan Stanley Portfolio Solutions, said in a statement. “But inflation is still very much a part of the conversation and should factor into long-term investing decisions.”

Loewengart said investors who moved into cash over the last year or two should consider the purchasing power risks.