Investors Are Still Optimistic, But Skepticism Is Creeping In

Call it a case of high anxiety for individual investors. This group is still bullish about their investments, but has increasing doubts about future returns as concerns about overvaluation, tariffs, inflation, and government policy continue to rise, according to Investopedia’s most recent sentiment survey.

While the stock market dances around record highs, fewer respondents remain optimistic about its resilience and prospects for future returns.

Optimism In The Market Softens

While the majority of respondents (57%) say they are optimistic about the stock market now, less than half (39%) describe themselves as “cautiously optimistic”, with only 3% indicating that they are “extremely optimistic”. 

More than one-fifth say they are skeptical about the stock market and 25% indicate they are investing less than they usually do. For the one in five respondents who say they’re investing more, stocks and ETFs top their list of purchases. Additionally, 23% say they are investing more in foreign stocks, which is twice as much as last year. 

As for future returns, the results are fairly split, another sign that overall confidence in the stock market is fairly muted. Slightly less than one-third (29%) believe that the S&P 500 will rise another 5% or more in the next six months, while 25% have a more dismal outlook, anticipating a significant drop or a correction of 10%. 

And this has been a year of ups and downs for the market. The S&P 500 nearly fell into a bear market in early April following the president’s announcement of tariffs, but has recovered 22% since then and is up 13% year-to-date.

Investors Think There May Be Bubbles In Their Favorite Stocks

Investors’ high anxiety is being fueled by continued concerns about overvaluations in AI-related and mega-cap tech stocks—and for good reason. 

The biggest and most widely-held stocks in the market like Nvidia (NVDA), Palantir (PLTR), Microsoft (MSFT), and Alphabet (GOOGL), have been driving the overall market higher, leading to historical new highs across many fundamental valuation metrics. 

The forward price-to-earnings ratio and price-to-sales ratios for the S&P 500 are at all-time highs, while the CAPE ratio—or cyclically-adjusted price to earnings ratio—is the highest it has been since the dot-com bubble in 1999, according to Factset.

While investors may be concerned about bubbles, it hasn’t stopped many of them from buying and holding the same stocks and sectors they’re worried about. The top ten holdings of respondents remain heavily concentrated in AI-related and mega-cap tech stocks, with Nvidia, Microsoft, Amazon and Palantir among the top 5.

Tariffs, Inflation, and Government Policy Dominate Macro Concerns

Bubbles in their favorite assets are the least of investors’ concerns, according to our survey. 

Tariffs and reciprocal tariffs continue to dominate their wall of worries, closely followed by inflation. 

Investors have voiced concerns about the future accuracy of government data and the independence of the Federal Reserve. Since the president fired the BLS Commissioner following a weaker-than-expected jobs report and then tried to oust Fed Governor Lisa Cook in August, a greater proportion of investors report believing that factors like ‘threats to Fed independence’ may impact investment performance.

Politics and Its Impact On Trust In The Markets and The Fed

It’s almost always best to keep politics and our portfolios at a safe distance from each other, but it’s been hard to do that in 2025.

While government policy dominates our readers’ list of concerns, trust in the market under the Trump administration has waned—with nearly half of respondents (47%)  indicating that they trust the markets less since January of this year. Just 17% say they trust the markets more, while 29% say it has had no impact. 

As for the Federal Reserve and its future, 55% say they approve of the Fed’s handling of monetary policy, a five-percentage point decline from June, while the overwhelming majority, or 78% say that it’s important to the capital markets that the central bank remain independent.  

What Would Investors Do With An Extra $10,000?

Despite their rising anxiety levels, individual investors would still be willing to put their money to work in the stock market if they had an extra $10,000. 

At the top of their wish list are individual stocks, with 19% of respondents choosing that option, followed by ETFs, chosen by 15% of respondents. 

New to the top three is gold, which has been the best performing asset in 2025, up 46% year-to-date. As the notorious safe-haven asset of choice against inflation, it’s not a surprise that gold has become more desirable for individual investors.