Investor sentiment turned decisively bullish in the third quarter of 2025, with 61% of retail investors expressing optimism about the markets—up 12 percentage points from the prior quarter, according to Morgan Stanley Wealth Management’s latest Retail Investor Pulse survey. The shift marks a reversal from Q2, when bearish sentiment held a majority. 

A majority of investors (58%) now believe the U.S. economy is strong enough to justify Federal Reserve rate cuts, a notable 10-point jump from last quarter. Inflation remains the top concern, though it eased slightly, with 39% of respondents citing it—down from 41% in Q2. Tariffs followed at 33% (down from 35%), while concerns about market volatility held steady at 24%. 

The survey, conducted July 1–16 among 924 investors across asset brackets and investing styles, highlights a more globally oriented outlook amid persistent geopolitical uncertainty. Interest in international markets rose to 58%, up four percentage points from Q2, signaling a broadening risk appetite beyond U.S. equities. 

“Amid tariff and geopolitical uncertainty, we’re still seeing the stock market rallying to all-time highs,” said Chris Larkin, Managing Director and Head of Trading and Investing at E*TRADE from Morgan Stanley. “While headwinds may be on the horizon, investors are holding their ground in sectors like tech and financials, while also looking abroad for new investment opportunities.” 

The sector outlook for Q3 shows investors leaning heavily into technology, with interest jumping nine percentage points to 57%—solidifying its place as the favored sector. Energy held steady in second at 43%, reflecting continued interest despite recent oil price volatility. Financials gained ground, climbing into the top three at 35%, buoyed by strong performance in consumer finance stocks and optimism around a steeper yield curve should the Fed begin cutting rates. 

The survey included a cross-section of investor profiles: fully self-directed investors, those who delegate to financial professionals, and hybrid investors who use a combination of both. Respondents were segmented by investable assets: under $500K, $500K to $1 million, and over $1 million. Fieldwork and administration were managed by research firm Dynata. 

The sharp swing in sentiment underscores how quickly market narratives can shift in response to macroeconomic developments, particularly around monetary policy. With rate cuts increasingly viewed as likely, and risk assets trading near highs, investors appear poised to recalibrate portfolios toward growth-oriented sectors while also eyeing international diversification.