Election 2020 isn’t among investors’ top concerns: Investopedia Anxiety Index

Yahoo Finance’s Brian Sozzi and Alexis Christoforous break down Investopedia’s latest Investor Anxiety Index results with Investopedia Editor-In-Chief Caleb Silver.

Video Transcript

ALEXIS CHRISTOFOROUS: Investor anxiety is pretty high. We've got investors worried about the markets and what's to come. Here to break down their latest Investor Anxiety Index is Investopedia's Editor-in-Chief Caleb Silver.

Caleb, good to have you on the show again. So what's the big takeaway here? What are investors most worried or concerned about at the moment?

CALEB SILVER: So they're worried about two things. They're worried about the markets and valuations. We've come very far, very fast, right, the fastest bear market in history, the fastest recovery in history. So valuations is something top-of-mind for them.

But we also track their personal finance anxieties based on the terms they're searching for on Investopedia, and they are super concerned about what's happening inside the home here, so potential for bankruptcies, potential for foreclosures, forbearance, credit card delinquencies. All the little things that make up your personal economy, our readers are very concerned about that. But they're also concerned about it watching what's happening in the markets, looking at companies they've been known-- they've known for decades going bankrupt. So you have this mix of market anxiety and personal finance anxiety meeting head-on right here as we head into the dog days of summer.

BRIAN SOZZI: Caleb, do they expect the market to continue to climb?

CALEB SILVER: Well, we-- we've done a survey of our newsletter readers for the past four months, even before the pandemic really hit. And right now they're expecting, by and large, the market to fall over the next three months. Most of them are expecting that, and most of them are at least a little bit concerned about where the market is today.

And that makes a ton of sense when you think about how far we've run. But the concerns are there, and they're thinking that the market probably has a leg down here, but that isn't stopping them, our readers in general, from buying stocks. They've been still pretty aggressive with some popular names.

ALEXIS CHRISTOFOROUS: I want to get to what names they're buying in a moment. But first, break down sort of the demographic of this for us in terms of age. Are younger investors taking a little bit more risk, a little less worried than, say, older investors?

CALEB SILVER: As you might expect, younger investors are taking on more risk. And when we look at the stocks that they're buying and the sectors that they're favoring, they are super risky. Older investors are still buying stocks and sticking with some blue-chip names, but they're sticking with some of the names they've held on probably for decades, and a lot of that's in the oils-- in oil services sector, where there are dividends to be had. So you have this mix of high risk with younger investors with some money to spend or some time on their hands, trying to trade stocks, and the older investors trying to hold onto the core of their portfolio.

BRIAN SOZZI: Caleb, are they concerned at all about the coming presidential election? I can't tell you, so many guests we've been talking to on Wall Street, they continue to ignore the coming election and just simply ride this rally.

CALEB SILVER: Yeah. Of all the things they're concerned about, that was not in the top 10, which I found surprising as well. I think investors are kind of used to the fact that it does matter who's president to a certain extent, but it really matters what's surrounding the president in terms of the makeup of Congress and legislation that may or may not be passed. So that's not top-of-mind.

Top-of-mind is definitely valuations for them. The resurge in the coronavirus is definitely on their minds right now. And the uncertainty, also, between China and the rest of the world has them pretty concerned at the moment.

ALEXIS CHRISTOFOROUS: What about individual names, you know, what are the companies that investors are sort of clinging to? And has that changed or is it a continuing trend, you know, quarter over quarter or month over month? I think this index is a monthly index.

CALEB SILVER: Sure. It's remarkably consistent. Since February, our readers, and we've surveyed about-- there's about 500,000 that get our daily newsletters, about 1,000 responded, they've been very consistent about the names that they've held, and a lot of them are the blue-chip stocks that have kind of brought us here, brought this rally up. As you know, the S&P 500's heavily weighted with about five or six stocks.

It's that, but there's also some older traditional names that you wouldn't expect to find in here, like AT&T. Disney's been a long-time holding for a lot of investors, but I was shocked to see AT&T. But we also see a move to health care stocks, as a lot of these investors are now betting on the hope for a vaccine, and they're seeing a surge in that sector.

ALEXIS CHRISTOFOROUS: [INAUDIBLE]

BRIAN SOZZI: Caleb, as you-- Go ahead, Alexis.

ALEXIS CHRISTOFOROUS: I saw-- I was looking through your data, and I'm seeing that younger investors are actually taking a chance with some of these airline stocks, which have been absolutely pummeled. Tell us about that. And what names, in particular, are they buying up?

CALEB SILVER: It was wild to me as well. We saw a little bit of this as the market started to recover in-- I think in April, but they've been heavily betting on Delta Air Lines, American Airlines, but they're also betting on some other transport stocks. But the bets on the airlines I found very curious, because of all sectors, that seems the one that has the most challenges in front of it. Business travel's basically gone. Nobody is doing a lot of luxury travel.

I just drove 1,000-- 1,500 miles for a vacation with my family. So nobody is really flying right now. But younger investors are taking bets on these stocks, and they're betting not just on the stocks, there are also some options betting going on. So they are definitely playing with fire as they-- as they try to time the bottom for airlines, which is almost impossible right now.

BRIAN SOZZI: As you sit back, Caleb, and analyze this data and think about it a bit, are you seeing bubble activity? Investors are-- they're worried about valuations. They're worried about the stock market falling in three months. But they're still out there buying, and they're buying tech stocks, which are at some of the highest valuations in history.

CALEB SILVER: Right. So it's a tug of war, right? There's that fear of missing out. They don't want to miss any more of this rally or what may be to come. At the same time, you know, it's TINA. there Is No Alternative if you're looking for yield right now, other than the stock market for individual investors, right.

They can't invest in private equity, a lot of them. They can't invest in some other risky sectors that they may want to participate in. So the stock market's been the place to be. And it's hard to argue with these tech stocks that were marching higher week after week until about last week when we saw the sector rotation, right? We saw the rest of the market, the industrials, the cyclical stocks recover, but our readers are still betting on these big tech stocks, and they're taking some chances on the airlines and some other companies that you and I might consider pretty risky right now.

ALEXIS CHRISTOFOROUS: Did your readers talk at all, or did you ask them at all, about the stimulus package coming from Congress? Are they looking-- looking for more unemployment benefits? Are they looking for those unemployment benefits to be extended? And is that a worry of theirs?

CALEB SILVER: By and large, they are concerned about that, and they are hoping that there'll be another stimulus package. We also asked them, the money that they have been investing over the last month to six weeks, is that coming from stimulus-- from the stimulus money they might be getting or unemployment insurance? Are they hitting their 401(k)s? Or are they just using cash that they had on hand?

And by large people, and we were happy to see this, were using available cash on hand to invest, not taking that $600, not taking money out of the 401(k) to try to play the market like a casino. Responsible investing. It's a smart group of readers, and they seem to be doing it responsibly, although some of the picks seem a little bit dangerous right now.