Retail investors are maintaining a surprisingly upbeat outlook even as a confluence of risks—from persistent inflation to escalating geopolitical tensions—clouds the market landscape, according to Morgan Stanley’s latest Wealth Management Pulse Survey for the second quarter of 2025.
The survey, which polled a broad cross-section of individual investors, found that 55% of respondents described themselves as bullish, only a single percentage point below the 56% recorded in the first quarter. This marginal decline suggests that confidence has remained remarkably resilient despite a backdrop of heightened uncertainty.
Inflation continues to dominate investor worries, with exactly half of those surveyed (50%) naming it their primary concern. However, the share of investors citing geopolitical conflict as their top worry has surged to 20%, up from 12% in the prior quarter. Concerns tied to rising energy costs also rose sharply, climbing to 18% from 12% over the same period. These shifts indicate that the risk landscape is broadening beyond traditional economic pressures.
Expectations for market turbulence are also intensifying. Roughly 63% of investors now anticipate that volatility will increase in the near term, a seven-percentage-point jump from the first quarter. This aligns with broader market signals and echoes warnings from some asset managers about the cost of hedging against tail risks. For advisors, this may underscore the relevance of strategies discussed in Western Alternative Strategies CIO Warns Advisors Overpay for Volatility Hedging, Underprepare for Tail Risks.
Political uncertainty is adding another layer of complexity. Nearly half of respondents (48%) said that the upcoming midterm elections could influence stock market performance, reflecting a growing awareness of policy-driven market swings.
Despite these headwinds, investors are not retreating to the sidelines. On the contrary, engagement levels are rising: 50% of respondents reported spending more time managing their portfolios this quarter, up from 41% in the prior period. This suggests that many are actively adjusting their strategies rather than freezing in place.
“With geopolitical concerns, policy uncertainty and higher costs, market whiplash is very real, making day-to-day moves feel noisy,” said Chris Larkin, Managing Director and Head of Trading and Investing at E*TRADE from Morgan Stanley. “But rather than pull back, many investors remain engaged—adjusting to volatility and looking for opportunities in a more complex market backdrop. A healthy dose of volatility is a normal part of market dynamics, and commitment to an investing plan is key.”
Sector preferences reveal a blend of growth-seeking and defensive positioning. Information technology remains the top sector for potential, cited by 56% of investors, buoyed by ongoing developments in artificial intelligence. Interest in energy held steady at 49%, even amid elevated oil prices, while healthcare gained two percentage points to 35%, as investors seek stability. These trends may inform advisors’ asset allocation discussions, particularly as Advisor ETF Preference Hits 60% as Mutual Fund Share Slips to 10%, ISS Survey Shows highlights shifting vehicle preferences.
The survey’s findings also resonate with broader research on investor behavior. For instance, Gallup and Ameriprise Surveys Reveal Persistent Retirement Anxiety Despite Short-Term Confidence similarly points to a gap between near-term optimism and long-term preparedness. As advisors navigate this environment, the Morgan Stanley data reinforces the importance of helping clients stay disciplined amid noise.
