Investors' risk appetite jumps to highest since 2021 as outlook improves

Equity investors were significantly more willing to tolerate risk in May as the group's outlook on returns and most industry sectors turned positive, according to the latest results from S&P Global's Investment Manager Index survey.

US equity investors' risk appetite grew to 28% in May from 5% in April, to reach its highest reading since November 2021. The latest results come in stark contrast to investors' year-ago stance at negative 34%.

"Positive sentiment stems from the latest earnings season and signs of sustained corporate health even in a higher-for-longer rates environment, as well as the belief that both the US and broader global economies will avoid recession," said Chris Williamson, executive director at S&P Global Market Intelligence.

S&P Global's Investment Manager Index survey includes monthly responses from a panel of just under 300 participants employed by firms that collectively represent approximately $3.500 trillion in assets under management. Data was collected May 7–10. If you would like to receive the full report on a regular basis or participate as a panel member, please email economics@spglobal.com.

Positive outlook on returns

US investors shared positive expectations for equity market returns for the first time in 2024, with the Equity Returns Index surging to 10% in May, up from negative 26% in April. The upturn was underpinned by a decrease in the proportion of investors expecting the market to lose value. The proportion of investors holding that belief fell to a six-month low of 23%, down from 39% the month prior.

Investors ranked shareholder returns and equity fundamentals as the two greatest drivers of equity returns in May, as the latest earnings season bolstered investors' confidence in US market performance.

"At the same time, investors believe that rate cuts remain possible later in the year, helping to sustain earnings growth — note that analysts have revised up their second-quarter earnings estimates in the light of progress seen so far this year," Williamson said.

While the US macroeconomic environment dropped from the top spot amid a 22% decrease, most other factors saw single-digit changes in sentiment compared to April.

Optimism extends to most sectors

Equity investors' upbeat outlook extended to most sectors, with nine of 11 total sectors viewed positively in May as sentiment toward both communications services and utilities turned positive.

Energy continued to be perceived most favorably despite a 26% drop in sentiment driven by lower crude oil prices, while tech saw the greatest monthly boost after a dip in April.

Investor confidence in real estate remained the weakest at negative 34%, prolonging a nearly three-year period of sustained negative sentiment toward the sector.