US investor risk appetite returns in July, yet bearish stock outlook persists

Risk appetite has returned for US investors after a five-month lull.

S&P Global Market Intelligence's latest Investment Manager Index survey showed that risk appetite was prevalent among 12% of surveyed investors on net, an improvement from negative 13% in June and the first positive reading since January. The index measures net risk appetite among surveyed investors, with those reporting a high tolerance or aversion counting with double weight.

Tariffs and geopolitical uncertainty rocked markets throughout the spring, yet those concerns have largely faded as equities reached new highs in early July. Still, investors are cautious about the path ahead with a majority continuing to expect near-term market losses.

"The revival in sentiment toward US equities follows a broader pattern of investor preferences shifting back towards global equities. In this respect the brighter news on the renewed bullishness toward US equities is marred by all other major markets bar the UK and mainland China having stronger year-end outlooks," said Chris Williamson, executive director for Market Intelligence, in a news release accompanying the survey results. "This reflects the US continuing to be perceived by investors as one of the most likely sources of disruptive geopolitical risk in 2025."

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 July 1–4. If you would like to receive the full report on a regular basis or participate as a panel member, please email economics@spglobal.com.

Near-term equity outlook less downbeat

The survey's Equity Returns Index improved in July from June while remaining in negative territory, indicating that investors on net continue to expect near-term market losses. The index registered a reading of negative 5% in July after slipping to negative 32% in June.

Equity fundamentals, shareholder returns and central bank policy were viewed as the drivers of stock performance in July, whereas other factors were viewed as a drag on markets. Equity fundamentals and central bank policy flipped in July to drivers of market performance after being viewed as detriments to it by investors surveyed in June.

Among the factors viewed as a drag on equities, sentiment improved with respect to the government fiscal policy, the US and global macroeconomic environment and politics. Valuations versus historical levels were seen as the largest drag on equities, with a net of 78% of respondents viewing the category negatively.

"Investor appetite has been fueled by greater expectations for fundamentals, with earnings, profits and dividend outlooks improving amid reduced recession worries," Williamson said in the release.

Financials emerges as most preferred sector

Investors on net signaled bullishness toward seven of 11 market sectors, with bearish views on consumer staples, real estate, energy and consumer discretionary stocks.

Financial stocks jumped to the top of the list among sectors viewed favorably by investors, driven by easing concerns over growth and anticipation of more supportive central bank policy. It was the first time the sector had topped the list since February, according to the survey results.

IT stocks followed in second place, though the sector registered the highest degree of bullishness in eight months.

Consumer discretionary remained the most out-of-favor sector with investors, though sentiment improved in July to negative 24% from negative 42% in June.

"While economic growth and recession fears have eased compared to June, the macro environment is also still viewed as adverse for equities on balance, as is fiscal policy, keeping investors particularly wary of consumer discretionary stocks, as well as energy and real estate," Williamson said.