Why investors are 'waving the caution flag'

Investopedia Editor-In-Chief Caleb Silver joins Yahoo Finance to discuss the caution rising amongst investors in the market as economic uncertainty intensifies and supply chain disruptions persist.

Video Transcript

JULIE HYMAN: Well, we have been talking about how consumers were feeling last month. Let's talk about how retail investors are feeling about the market right now. A new Investopedia survey shows nearly half of investors say that they're worried right now, at least somewhat worried about the market. Let's bring in Caleb Silver to talk more about this. He's the Investopedia editor-in-chief. Caleb, it's good to see you. So as you look at these results, people are worried. Are they more or less worried than they have been? And what are some of the primary concerns out there?

CALEB SILVER: Good to be with you. And yeah, Julie, they're waving the caution flag like they haven't in months. And there's been plenty of reasons to be worried. But this has been a pretty bullish crowd. We've been surveying our readers, our newsletter readers, about 1.5 million of them, every day for the last 18 months. And this is about as worried as they've been since April of 2020, for obvious reasons.

45% say they are somewhat to extremely worried about the market. 34%, more than a third, say they expect a significant drop for stocks in the next six months. That's a 10 percentage point increase since May of 2021. Since we've been serving so frequently, to us, that feels like a lot. 25% say they're investing less than they were back in May. And only 15% say they're going to invest more. And almost 20%, Julie, say they're going to put more cash in the bank right now.

BRIAN SOZZI: Caleb, what are they so concerned about? Is it inflation? Is it the pandemic? Is it something else?

CALEB SILVER: Well, you know what surprised us is they're worried about the supply chain hiccups and those supply chain disruptions that are really leading, in part, to inflation and to worries about companies being able to meet their profit and revenue targets for the rest of the year. That surprised me, 53% citing the supply chain as their biggest concern. 43% are worried about more government spending. It looks like they're going to get some more of that. And that's been good for the stock market.

41% say inflation, but only 29%, guys, say COVID-19 or spreading variants of COVID-19. I think they may be over that, realizing that we may have been able-- we may be able to live with it right now. They're really worried about the supply chain and what that means to corporate profits going forward.

JULIE HYMAN: Yeah, that government spending one is a bit of a head scratcher for me, I have to admit. As you said, more government spending has traditionally been better for markets unless they're concerned that now, it's maybe not going to happen. I don't know. I don't know. I guess we can't-- I don't know what's the reason for that number.

CALEB SILVER: I think the concern is more spending, more borrowing could lead to more inflation over the long haul. I think some of our readers-- we have a pretty good spread of younger investors and also folks that have been in the market a very long time. They're thinking back to when we had a lot of government spending in previous decades, where we were more afraid to print money. We're not afraid to print money right now. So, you know, this stock market has liked the spending, and they should expect more.

BRIAN SOZZI: Despite that concern--

JULIE HYMAN: What does-- oh, sorry. Go ahead.

BRIAN SOZZI: Oh, go ahead, Julie. Yeah, no, really, despite that concern, it was-- is they're still taking a lot of risk in terms of what stocks they're buying. I mean, look, Nividia is climbing the charts for you. Very risky tech stock.

CALEB SILVER: Yeah, and they've been pretty faithful to that home cooking, to the large cap technology stocks. If you look at the top holdings of the stocks that they own, it looks a lot like the SPY. It looks a lot like the Qs. Apple, Amazon, Microsoft are in there, but Nvidia has been a recent addition. Tesla is no longer a part of their top 10 holdings. We've been serving, again, for 18 months. Tesla is out. Johnson & Johnson in, Nvidia in. But it's very interesting to see what they've gravitated towards, but a lot of them like those home cooking, big cap tech stocks, especially those that kick off some dividends.

JULIE HYMAN: Caleb, I'm pretty surprised by what your readers say about crypto on a couple of different fronts. This, as we see Bitcoin push above 60,000 today on anticipation that there's going to be an approval for a Bitcoin futures ETF. But people that you surveyed think that crypto is one of the most likely assets to be in a bubble. And I'm also looking at if they had an extra $10,000 to spend, crypto is not even near the top of the list.

CALEB SILVER: Right, a lot of them are hesitant about crypto. They've sort of-- some of them have been creeping in over the past year and a half. But they do think crypto and the US housing market are the biggest bubbles out there across capital markets. You could sense that in some areas of the market, especially in some coins. But those are the two that they're most concerned about.

32% said stocks were in a bubble. We're now approaching record highs again, not to say that stocks are in a bubble. Only 20%, guys, said NFTs were in a bubble. I don't know if they've been shopping for lazy apes lately, but those are kind of expensive. And only 8%, guys, said commodities, yet commodity prices are the ones that feel like they're the highest of all asset prices right now relative to one another and have spiked the most so far in 2021.

BRIAN SOZZI: I really need to search out there, Caleb, for lazy apes. You got me on that one. But if I had $10,000 today, how should I invest it?

CALEB SILVER: Well, you would probably buy some really sweet sneakers or some sweet gear. But 10,000 bucks, we asked our readers about this. 20%-- 25% say they'd buy stocks, 19% said ETF. So this is a stock and an ETF buying crowd. 18% said they'd put it in savings. Only 12% said they would put it in debt. They've been-- a lot of these folks, we've been asking them. Did get some of the government assistance during the pandemic, and they invested it, more or less, in stocks. I think most of them would still do that right now.

JULIE HYMAN: Hey, debt's cheap right now. It makes sense that people would necessarily-- wouldn't necessarily prioritize paying down debt. By the way, extra $10,000 for Brian Sozzi, he'd spend it on the Firebird. You know, that thing needs a lot of maintenance. It needs a lot of help.

BRIAN SOZZI: No, it doesn't. No, no, it doesn't. It's very well taken care of.

JULIE HYMAN: It's an elderly car at this point. It needs, you know--

BRIAN SOZZI: It's beautiful.

JULIE HYMAN: It definitely-- it needs something. Caleb, good to see you this morning. Thanks so much. Caleb Silver is editor-in-chief at Investopedia.

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