Context is key… see the forest for the trees… don’t sweat the small stuff… whether maxim or idiom, being able to see the big picture is critical to just about everything we do. And this is especially true with investing. Our daily feeds are full of “news” and various tidbits of information organized by algorithms that could, if followed like breadcrumbs, easily lead us astray. What helps is having trusted sources of information that act as a guide, providing detail but also the all-important context that helps put everything into perspective.
I have several research sources but one of the more important has long been Bespoke Investment Group. They provide macroeconomic analysis, stock research, and a bunch of tools I use regularly to help understand what’s going on in the markets. I’ve been an institutional subscriber for at least a dozen years.
Anyway, one of the reports they generate is a twice-annual survey of their client’s views on the stock market, the economy, and other topics. All of it is interesting but here’s my paraphrasing of several of the more relevant points with some added notes of my own…
As of this summer, roughly 53% of institutional investors consider themselves moderately bullish on the stock market, similar to the end of 2025 and higher than other retail investor sentiment surveys. About 23% of Bespoke’s survey respondents consider themselves neutral, also about the same as at the end of last year.
Nearly 60% of survey respondents said they’d look for new buys if the stock market dropped 5% in a day and over a third said they’d do nothing. The reason for this general bullishness: the strength of the economy and overall market fundamentals. To me, this implies a cautious (or even picky?) sort of optimism that’s healthy for markets.
Risk-wise, investors are currently more worried about persistent inflation and the political environment than they are about a broad-based economic downturn. That’s a change from last year when over a third of respondents said they were concerned about a downturn. Separately, Bespoke publishes a matrix of economic indicators that shows our economy is seeing increased positive momentum since last fall. So even with inflation and “politics” being a problem, the list of positives including a tailwind from AI-related investment that’s expected to last awhile, outweighs the negatives.
Investors in the survey said their portfolios are still “overweight” the Technology and Communication Services sectors. The overweight has grown from about 50% last year to 56% currently, which tracks with guarded enthusiasm about the growth of AI. As of yesterday, those two sectors make up about 50% of the S&P 500, so a sizeable group of investors owns proportionally more than the market average.
When it comes to thinking about stock market opportunities related to AI, survey respondents think we’re in about the 3rd inning of the “AI Bubble” baseball game. That helps explain the overweight mentioned above.
Investors were also asked about their usage of AI in their work and for personal productivity. Nearly half said they use AI daily and, in total, 85% said they at least use AI a few times a month. This is a new question in the survey so it will be interesting to see how usage evolves.
As I’ve said in other posts, I’m being very cautious about giving third party AI platforms access to your information. It’s one thing to leverage the models for personal use but plugging them into a client’s personal and portfolio information is quite another. Granted, this reluctance is partly due to some paranoia on my part but also because of subtle errors I’ve noticed while experimenting with AI that’s embedded in some new tools specific to my industry. These errors should be trained away as the models get smarter; I understand that. However, I want to watch and wait for the time being because I think it’s too easy for consequential mistakes to go unnoticed right now given the excitement and speed of it all.
In the bitcoin/crypto realm, nearly half of survey respondents said they don’t own crypto and have no intention of ever owning cryptocurrencies. However, 33% of respondents said they hold less than 5% of their portfolio in crypto. Investors also report being much less bullish on gold. Both of these stats generally correspond to major price declines this year in both categories. Investors are fine with taking on risk within their portfolios, they’re just being pickier about it.
So, there you have it… a quick look at how a group of institutional investors views the market environment. I think this is important context because these generally positive views are helping in the background to drive day-to-day momentum in the stock market. This is true even with all the volatility we’ve been seeing in certain sectors and the various headline risks that can seem to appear overnight. As always, it will be interesting to see how these views shift along with markets.
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