US investor risk aversion extends to 5th straight month in June

Overall US investor sentiment leaned toward risk aversion for the fifth month in a row, even as caution in equity markets diminished for a third straight month.

The results of the monthly S&P Global Investment Manager Index US equity investor sentiment survey, released June 10, showed the Risk Appetite Index rose to negative 13% in June from negative 19% in May and negative 31% in April. Though sentiment has improved each month since a recent low point in March, the index in June continued its stretch of negative readings, indicating risk aversion that began in February. The index measures net risk appetite among surveyed investors, with those reporting a high tolerance or aversion counting with double weight.

Equity markets were volatile in March and April as the US readied new tariffs on nearly all major trading partners. Stocks have since rebounded from an April sell-off after most tariffs were delayed until July while global governments pursued trade negotiations with the US. Still, market caution persisted as negotiations played out and market observers pivoted their attention to a budget bill now being debated by the US Congress.

"While the survey has seen some calming of worries over tariffs, the political environment remains the biggest drag on equity performance," Chris Williamson, executive director at S&P Global Market Intelligence, said in a report released alongside the survey results. "Fiscal worries surrounding the deficit and cuts in spending in areas such as Medicare are also driving risk aversion, with little scope for any boost to equities meanwhile seen from US Federal Reserve rate cuts."

Near-term equity losses still expected

Even with the easing in risk aversion, investors expect net market losses in the coming month.

The survey's Equity Returns Index slipped to negative 32% in June from negative 29% in May. The score reflects the percentage of surveyed respondents expecting an improvement in equity returns over the 30 days following the end of the survey, minus the percentage of those expecting net equity losses. June's survey score indicated a slightly more pessimistic outlook than in May.

For the full year, investors anticipate a modest year-over-year gain for the S&P 500, with the median expectation projecting the index will close out the year at 6,000. This would be a 2% improvement from 2024, compared with the 23% surge from 2023 to 2024.

Surveyed respondents indicated that only shareholder returns were likely to contribute to positive market performance in June, when compared with seven other market-influencing factors. By contrast, most surveyed investors believed that the political environment, high stock valuations and government fiscal policy would place the most pressure on equity returns.

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 June 2-5. If you would like to receive the full report on a regular basis or participate as a panel member, please email economics@spglobal.com.

The index readings for political environment and stock valuations have consistently been the lowest this year among all market factors.

The survey index score of negative 33% in June for the US macroeconomic environment improved 29 percentage points from May. Though the outlook remained pessimistic, this was the biggest improvement in sentiment among all eight market factors.

IT emerges as most preferred sector

Investors signaled bullishness in six of 11 industries in June, with the greatest preference for information technology, according to the survey's sector index.

Sentiment toward the industrial and communication sectors flipped from negative in May to positive in June, with the communication sector showing as the second-most preferred sector overall this month.

The energy sector was reported to have the largest improvement in index score in June, with a 34-percentage-point increase month over month, though investor net outlook for the sector remained negative.

Sentiment for the healthcare sector was the only one to deteriorate to negative in June from positive in May. This is the first time in the survey's five-year history that investors reported bearishness in the sector. The survey report attributed the pessimistic outlook to concerns over potential Medicare cuts in the US.

The consumer discretionary sector was the most out of favor with investors in June, followed by real estate. The real estate sector's index score in June dropped the most month over month, with a 19-percentage-point decrease to negative 35%.