Inflation Fears Persist as Investor Optimism Softens, Morgan Stanley Survey Finds
Morgan Stanley Wealth Management released its latest Retail Investor Pulse Survey, revealing that while optimism among investors has cooled, most remain focused on the long term and are maintaining their investment strategies despite persistent macroeconomic uncertainty.
Inflation remains the top concern for investors (45%), rising six percentage points from last quarter and ranking as the No. 1 concern every quarter in 2025. Nearly half (47%) expect inflation to moderate this quarter but worries about rising prices continue to dominate sentiment. Tariffs (33%) and market volatility (21%) rounded out the top three concerns.
Investor bullishness declined five points to 56% this quarter, reflecting growing caution amid shifting economic signals. However, expectations for Federal Reserve rate cuts have strengthened: 41% of investors now anticipate the Fed will cut rates by 0–0.25% at its next meeting—up 12 percentage points from last quarter—while only 19% expect rates to remain unchanged, down eight points.
Despite heightened uncertainty, most investors are standing firm. Forty-one percent said they don’t plan to make any portfolio changes over the next six months, while only 14% plan to move to cash, suggesting resilience in investor behavior even as inflation and policy risks persist.
“Investors undoubtedly have some whiplash amid a government shutdown, uncertain monetary policy, and some cracks in the labor market,” said Chris Larkin, Managing Director and Head of Trading and Investing at E*TRADE from Morgan Stanley. “That said, the market is still humming along, and investors seem to see the bigger picture, sticking to their investment strategies as they navigate potential headwinds.”
The survey also explored sector preferences heading into the fourth quarter of 2025.
- Technology remains the dominant pick, with 56% of investors favoring the sector amid continued performance strength.
- Energy held steady at 42%, as investors balanced short-term price pressures with long-term optimism around AI-driven efficiencies and innovation.
- Health care re-emerged in the top three (34%), reflecting cautious optimism and a renewed interest in defensive sectors.
The survey, conducted by Dynata from October 3–20, 2025, polled 961 U.S. investors—including self-directed investors, those who delegate to financial professionals, and hybrid investors. Respondents were grouped by investable assets: under $500,000, $500,000 to $1 million, and over $1 million.