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Investors Concerned but Not Pessimistic About Stocks

Investors Concerned but Not Pessimistic About Stocks

by Jim Norman

Story Highlights

  • 61% of investors express concern about volatility in the stock market
  • 49% are optimistic, 28% pessimistic about stocks over next 12 months
  • 77% say market is good place to invest and grow retirement savings

WASHINGTON, D.C. -- Sixty-one percent of U.S. investors are concerned about stock market volatility, including 16% who are "very concerned." At the same time, investors are more likely to be optimistic (49%) than pessimistic (28%) about the market's performance over the next 12 months. Optimism about the market's future has changed little over the past six months.

Optimism vs. Pessimism on Stocks
"As far as the general condition of the economy is concerned, how would you rate the following over the next 12 months? Performance of the stock market"
May 2018 November 2018
% %
Very optimistic 10 10
Somewhat optimistic 37 39
Neither optimistic nor pessimistic 28 22
Somewhat pessimistic 22 23
Very pessimistic 3 5
Wells Fargo/Gallup Investor and Retirement Optimism Index surveys, May 7-14 and Nov. 12-20, 2018

These findings are from the fourth-quarter Wells Fargo/Gallup Investor and Retirement Optimism Index survey. It was conducted Nov. 12-20, before the most recent round of stock market fluctuations, but after the Dow Jones Industrial Average had experienced swings of at least 500 points in a single day on 12 separate occasions in 2018. The survey reflects the views of 1,022 U.S. adults who have $10,000 or more invested in stocks, bonds or mutual funds.

Compared with May, investors are more likely to be very or somewhat concerned about the number of major day-to-day changes in the stock market -- a six-percentage-point increase.

Concerns About Stock Market Volatility
"How concerned are you about the recent volatility (ups and downs) in the stock market?"
May 2018 November 2018
% %
Total concerned 55 61
Very concerned 11 16
Somewhat concerned 44 45
Total not concerned 45 39
Not too concerned 40 34
Not at all concerned 5 5
Wells Fargo/Gallup Investor and Retirement Optimism Index surveys, May 7-14 and Nov. 12-20, 2018

As of mid-November, the market's dramatic fluctuations this year had not upset most investors, nor had they caused investors to alter their views about stocks as a good long-term investment choice. More than three-quarters (77%) still endorse the stock market as "a good place for people to invest and grow their retirement savings." Asked how they respond to 500-point single-day drops, 68% of investors say they feel comfortable riding these out; 19% say they view them as a good time to buy more stock; and 13% say such drops are hard to bear and cause them to consider getting out of the market.

Investor and Retirement Optimism Index Holds Steady Since Last Quarter

The survey's Investor and Retirement Optimism Index, a combination of views on personal financial goals and the national economy, has held steady at 98, similar to the index in each of the three previous quarterly surveys. The index is down a total of 19 points from last November's score of 117 but remains 25 points higher than it was two years ago.

Though the overall index shows no change since last quarter, its two components -- personal financial goals and the national economy -- moved in opposite directions. The Personal Index dropped seven points, reflecting lower optimism about investing and income over the next 12 months, but the Economic Index rose seven points on the strength of heightened optimism about economic growth and unemployment.

The increase on the Economic Index this quarter was mostly the result of a 15-point increase among retirees, while the drop in the Personal Index was driven by both retired and nonretired investors.

Investors' Personal and Economic Optimism
Scores for the Investor and Retirement Optimism Index, including scores for the Personal Index and the Economic Index
August 2018 November 2018
Overall Index
All investors 98 98
Retired investors 107 111
Nonretired investors 96 91
Personal Index
All investors 70 63
Retired investors 70 60
Nonretired investors 70 64
Economic Index
All investors 28 35
Retired investors 37 52
Nonretired investors 26 27
Wells Fargo/Gallup Investor and Retirement Optimism Index surveys, Aug. 12-20 and Nov. 12-20, 2018

Bottom Line

Most U.S. stock investors had a comfortable and rewarding ride throughout 2017. The Dow increased by almost 5,000 points, and there were no days with swings of 400 points or more.

This year has been different. By the time the November Wells Fargo/Gallup survey was conducted, the Dow had swung up or down by 400+ points on more than 20 separate days; and the gap between its highest closing average for the year and its lowest exceeded 3,000 points, but with a net gain of just over 500 points for the year.

The roller-coaster ride has caused more than six in 10 investors to be at least somewhat concerned, but in spite of these concerns, most investors continue to give the stock market a vote of confidence -- rejecting pessimism about the next 12 months and endorsing stocks as a good investment for retirement planning.

Although the wild fluctuations in the year's first 10 months did not turn many investors away from the stock market, this does not mean their patience or confidence is limitless. The losses of the past few weeks may test investors' belief that riding out the rough times is their best option.

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