Online investors are less bullish than they were in January as the anniversary of the “Flash Crash” draws near and renewed fears of market volatility surface, according to a survey by online broker TradeKing released on Thursday.

Meanwhile, investors are more worried about oil prices and inflation thank unemployment for the first time in seven quarters, the report found.

The decline in sentiment on the stock market among online investors declined for the first time in two quarters, falling 10 points since January, according to the survey conducted in April with about 230 independent investors.

The data shows that 41% of investors describe themselves as either “bullish” or “very bullish” over the next three months, a decline from 51% in January 2011 and 45% in October 2010. In addition, 11% of investors described themselves as “bearish” or “very bearish,” an increase from 6% in January, an all-time low for bearishness since this survey’s inception in the fall of 2007.

The survey asked, “Do you expect a market correction of greater than 10 percent before the end of Q2 2011?” Forty percent of respondents answered “no,” down from 48% in January, while 34% answered “yes,” up six points from January. Twenty-six percent said they were “not sure,” up slightly from 24% in January. 

Meanwhile, optimism about the market’s 2011 performance dropped significantly as 59% of investors polled said they expect the S&P to finish up 5-10%, down from 70% who thought so in January. Thirty-two percent said the market would finish either flat or down 5-10%.

“As we approach the anniversary of last May’s unprecedented market event, it’s perhaps not surprising that we see investors backing off from the strong bullish mood that marked the beginning of the year,” said Don Montanaro, Chairman and CEO of TradeKing, in a press release.  “Mr. Bernanke’s recent statements offered some measure of confidence, but investors are still watching a few areas that give them pause, especially oil prices and the potential for inflation.”

Investors are most worried about oil and inflation, with 48% ranking the cost of oil as their top trade trigger to watch for the next three months, up from 43% in January, while 37% worried about inflation and 33% were concerned about interest rate changes.

The favorite sectors for the next three months from a “long” position, were energy and commodities, with technology dropping out of the top-two spot for the first time since January 2009.  From a “short” position, retail and were top picks.



Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access