Retail investors around the world are maintaining hope for a bullish 2023

As a year defined by notoriously bearish global markets mercifully comes to a close, what’s the outlook about 2023 for investors around the world? They are actually more optimistic than you may think, according to new surveys conducted by global financial markets platform, Investing.com.

While conventional wisdom suggests that investors would be waving the white flag after a painful 2022, a previous survey conducted by Investing.com revealed that although retail investors in the U.S. are indeed experiencing fatigue as their portfolios continue to take a hit, they are nonetheless maintaining a hopeful outlook for the remaining months of this year and beyond.

Retail investors’ current mindset is largely the same in other nations, according to Investing.com, which is the world’s largest financial markets platform with 44 language editions and users in 136 countries.

Polled in late December, more than 90% of investors in Turkey (95%) and Brazil (94%) still plan to continue investing in the early months of 2023, compared with 89% in Spain and 80% in Italy. (In the U.S., 90% of retail investors had still planned to continue investing in the final months of 2022, according to the previous survey.)

Investors’ optimism is also reflected in the fact that more than half of respondents predict the onset of a bull market within the next 12 months, led by Turkish investors (73%), followed by those in Spain (67%), Italy (59%), the U.S. (57%), and Brazil (35%).

“A new generation of retail investors, which entered the market at the peak of the coronavirus pandemic, has become conditioned to buy the dip, regardless of market conditions, valuation concerns, and macroeconomic worries,” said Jesse Cohen, senior analyst at Investing.com. “In many ways, the retail investor has become a more powerful collective force than the professional investor, and they simply don't care about the same things as the experts.”

While institutional investors are reportedly increasingly abandoning stocks, retail investors’ portfolios remain largely comprised of equities — including 85% in the U.S., 78% in Italy, 74% in Brazil, 68% in Spain, and 67% in Turkey.

“While further market volatility into year-end and early 2023 is expected, stocks are poised to stage a strong rebound amid signs that inflation may have peaked, potentially allowing central banks around the world to pivot on monetary policy and start cutting rates in response to a slowing economy,” Cohen said. “Indeed, stock markets has a consistent track record of recovering steep losses and rallying to new records over time.”

Of course, this relatively upbeat outlook does not soften the blow of a notoriously bearish year, as most retail investors saw their portfolios drop in value during 2022. This includes 76% of investors in the U.S., followed by 66% in Italy and 51% in Spain. Yet in Brazil, only 43% saw their portfolios suffer losses (compared with 40% who saw gains), and in Turkey, a striking 78% saw their portfolios rise in value and only 15% experienced losses.

Digging deeper into the dip in the market, tech stocks experienced a particularly hard 2022, as shares in Intel (NASDAQ:INTC) have dropped 53% and the Nasdaq’s value has plunged by more than one-third. Fifty-six percent of respondents in the U.S. affirmed that the tech dip is not over, and that they anticipated further losses for tech stocks in the remaining months of 2022.

Yet a significant number of investors think that 2023 could be ripe for a rebound in the tech space. Thirty-four percent of U.S. investors believe that tech is the sector with the most potential in the coming months, followed by 28% of investors in Spain, 27% in Brazil, and 10% in Turkey. Citi analysts, too, are projecting a bounce-back year for tech stocks in 2023.

Investors are also optimistic about renewable energy for 2023, as 39% of Turkish investors consider it the sector with the most potential in the months ahead, followed by 29% in the U.S., 27% in Brazil, and 17% in Spain.

“Companies involved in the low-carbon energy industry, such as solar panel manufacturers and wind-turbine makers, as well as firms working throughout the EV supply chain, stand to benefit the most as the world shifts away from fossil fuels to alternative energy,” Cohen stated.

When it comes to cryptocurrencies, investors around the world are demonstrating a thirst for stability. In the U.S., 42% of retail investors have decreased their investments or completely pulled out of cryptocurrencies this past year, compared to 39% in Spain, 32% in Brazil, 22% in Turkey, and 19% in Italy.

Thirty-five percent of Spanish respondents are currently cryptocurrency investors, followed by 31% in both the U.S. and Brazil, and 25% in Italy. The U.S. figure represents a dramatic decline from the 67% investment rate in cryptocurrencies that Investing.com documented in November 2021 survey.

Sixty percent of U.S. investors expect cryptocurrency values to plummet further during the next year, a belief shared by 45% of respondents in Brazil, 42% in Italy, 36% in Spain, and 18% in Turkey. This indicates that the golden era for cryptocurrency investing may have already come to a close. Only 12% of American investors think crypto will reach its previous highs, as well as 15% in Italy, 16% in Brazil, 17% in Turkey, and 18% in Spain.

“Rising interest rates and bond yields have been weighing on cryptocurrencies for most of the year,” said Cohen. “When rates are low, investors are more likely to jump into risk-sensitive assets. However, when rates start to go up, investors become much more sensitive to risk, and that’s what we’ve seen in the crypto market.”

Ultimately, it is impossible to sugarcoat the reality that 2022 took a heavy toll on investors. But retail investors’ assessment of both the shorter- and longer-term future is notably hopeful and confirms their intent to ride it out in the financial markets during 2023.