Investor sentiment: What Investopedia's 'Anxiety Index' reveals

With uncertainty in the market, Yahoo Finance checks the temperature on what Investopedia Editor-in-Chief Caleb Silver calls investors' "cautious optimism." Silver joins Yahoo Finance to discuss what is currently worrying investors, from inflation to the US presidential election.

Silver says that meme stocks are also on investors' minds, but highlights a key difference between 2021 and the current meme trade: "Difference between now and 2021, higher interest rates, right? The difference between now and back then — there wasn't any sports or not a lot of sports or not a lot of sports betting. We're in the midst of the playoffs right now. We've got golf tournaments happening. There's a ton of sports betting going on right now, and I think a lot of these people that like to day trade and play the options game and play the zero days to even futures, I think a lot of them have the, the propensity for sports gambling as well."

For more expert insight and the latest market action, click here to watch this full episode.

This post was written by Nicholas Jacobino

Video Transcript

Investopedia is out with its latest anxiety index.

It's a gauge of investor sentiment based on the behavior of its readers here to help us dig into what investors are thinking.

Caleb Silver editor in chief of investopedia, we know like consumer sentiment surveys lately have not been fantastic, but you got, it doesn't seem like the people on your side are feeling too terrible.

Yeah, they're feeling cautiously optimistic.

We survey our readers actually every two months to see if they're bullish, bearish.

What are they worried about?

What are they concerned about what they do with an extra 10 grand?

They're cautiously optimistic, right?

But then when you get to actually putting money to work, we know April was one of the weakest months of inflows we've seen in several years.

Some of that's tax season, some of that is the fact that just investors weren't clear on which way things were going to go.

Maybe there's a little bit more clarity now, we've had the jobs report, right?

We've had this inflation report that's a little bit softer, but you don't see this retail emphasis like we did over the past couple of years except for the main stock, but that is just a small piece of what's happening here.

Retail trading is about 18% of the market now, usually it's around 22 25%.

What do you think?

Explains that, Kim?

I think it's not being able to see the future, right?

When we can't see the future, it's like kryptonite for investors.

So also we're coming up with some pretty good gains.

Now, we're back at record highs.

But when we asked them, what do you think the market is going to do six months from now?

The optimism in terms of returns over 5% was pretty limited.

And I think these are experienced investors, these are diy investors.

They've been at this for a while, they've been through some cycles and they know that after a great year, like last year, you kind of get a good year, especially in this, we're higher forever in terms of inflation and interest rates.

So is that what they're most worried about?

Still inflation is number one on their list of concerns.

And that really has changed over the past couple of months.

It was the presidential election and I don't think that is about who's going to win.

And what does that mean for taxes?

I think it means what chaos will ensue during this election season because I think now we're prepared for it.

So I think people were worried about that, but it's been inflation and that kind of limits them.

When you think about rising prices and you're talking about the anxiety index, they're not anxious about their portfolios and they shouldn't be.

Are we not entertained with all time highs?

They're anxious about their personal finances.

And that really tells you about the tale of two countries, the shareholders, the asset owners and those that are just struggling to make ends meet.

Sometimes those two don't line up very well and, and meme stocks was also pretty high up there.

You mentioned that meme stocks right now are cooking because Rory and Kitty, thank you for bringing everybody back to the party.

So that's got our readers crawling all over investopedia trying to relearn what, what did you and k I mean, you've been studying the markets a long time.

What did you make of what we saw?

I mean, we were talking about a lot this week along with a Gamestop.

A MC Blackberry.

What, what did you make of it?

And what were the kind of similarities and differences you saw between, you know, now and 2020 one frenzy?

Yeah.

Well, obviously things are very different because we don't have as many people participating, but you could feel it in this Reddit crowd and in the day trading crowd, it wasn't just the, the other day, right?

Options have been building in these meme stocks for the past couple of weeks.

Gamestop has had a lot of momentum in the past couple of weeks before roar and kitty came out with that tweak.

So it's kind of been building and I think they need to do something to release here.

Crypto.

Trade it off.

That's their other favorite chew toy.

So, I think the meme socks gave them a reason to get back involved.

We love it when people get involved but we don't like it when people try to catch falling knives.

And I think there was some of that going on if you look at today's trade.

Yeah.

Although people are just doing it for fun.

I mean, we talked to one youtuber earlier, Kevin Path who said, you know, you have to understand if you're gonna like buy an option or do something with one of these stocks that you could lose all your money.

So you, you, you sort of have to do it with your eyes open, I guess.

I mean, what's, what's notable to me and we've been talking about the meme stocks a lot.

As Josh mentioned, the differences between now and 2021 among them.

It's not the pandemic.

People don't have stimulus checks, you know.

So it's, there are people just like looking for kind of something different, something fun and you can't blame, you can't blame them.

But also difference between now and 2021 higher interest rates, right?

Difference between now and back then.

We weren't, there wasn't any sports or not a lot of sports or not, a lot of sports betting.

We're in the midst of the playoffs right now.

We got golf tournaments happening.

There's a ton of sports betting going on right now.

And I think a lot of these people that like to day trade and play the options game and play the, the, the zero days to even futures.

I think a lot of them have the propensity for sports gambling as well.

And so I think that's taken a lot of the money and the enthusiasm out by and large.

But like I said before, when you get retail trading and only under 20% of market activity, you just know that it's kind of like a dull roar going on below the scenes here.

And we're not getting that retail participation like we had in the past that said we got all time highs again and that's good in terms of the wealth effect in the way people feel about their money.

And you mentioned, you said you're surveying your readers, who are your readers?

I mean, is it traders, investors, men, women, young, old and like what income strata are we talking about this year?

8 to 80 or 18 to 80?

I should say white belt to black belt.

So we have people who are just learning and you can tell who they are but what by what they ask.

But we also have some, some pretty advanced traders and investors that have been at this for a while.

Average age around 45 years old, investable income north of $100,000.

They've been through some market cycles so they know what happens when the fed raises rates or when the fed lowers rates.

They know what happens when we have this market volatility that we had a couple of uh weeks ago, actually back in April.

And I think very, that's why they were kind of staying away from it a little bit.

But these are people that like putting their money to work, they are educated investors, they love it.

But when there's no catalyst, they're happy to sit on their hands and just be passive investors.

K thanks so much for joining us today.

Appreciate it.

And by the way, you can also catch Caleb on our podcast Stocks in translation, hosted by Yahoo Finance's very own, Jared Blicker tomorrow at 12 p.m. Eastern.