Equity investors grew less risk tolerant in April amid a worsening outlook on near-term equity market returns, according to the latest results from S&P Global's Investment Manager Index survey.

US equity investors' risk appetite declined from 14% in March to 5% in April, remaining in mildly risk-tolerant territory for a third consecutive month.

Despite the decline in near-term sentiment, investors were the most bullish on equities among all asset classes for year-end 2024, followed by commodities and corporate credit. Positive sentiment toward year-end performance for equities was at an over two-year high amid expectations of strong economic growth.

S&P Global's Investment Manager Index survey includes monthly responses from a panel of just under 300 participants employed by firms that collectively represent approximately $3.500 trillion in assets under management. Data was collected April 2–5. If you would like to receive the full report on a regular basis or participate as a panel member, please email economics@spglobal.com.

Losses ahead

Expected returns in the US equity market fell to a three-month low in April, as the Equity Returns Index dropped to negative 26% amid a pronounced negative outlook among North American investors. April's reading was below the rolling two-year average of negative 20%, with only 13% of investors expecting the market to gain value over the upcoming month.

"The bearishness is largely based on valuation, and, in particular, those relating to the tech sector," said Chris Williamson, executive director at S&P Global Market Intelligence. "Investors therefore see heightened risk for near-term downward price adjustments, though longer-term they remain positive about equity returns."

Valuations and the political environment remained by far the greatest drags on the market in April, according to equity investors, as geopolitical concerns and the US presidential election in November are stirring up lingering negative sentiment among the group.

Amid easing recession concerns globally, the global macroeconomic environment was the only factor influencing markets to see a double-digit change and reversal in perception compared to March. Investors perceived the global economy as a positive influence on returns for the first time in over two years, with sentiment improving from negative 11% in March to 3% in April.

Boost for energy, basic materials

Investors held favorable views of fewer sectors in April amid declines in sentiment for six of 11 sectors. Tech saw the greatest drop-off in sentiment for the month, falling from 26% in March to just 3% and ranking sixth in April.

Energy, basic materials and financials inspired the greatest boost in investor confidence in April, lifting all sentiment toward all three sectors to over one-year highs.

"In the case of energy, the renewed favor seen in the April survey is a function of rising prices amid rising geopolitical tensions and a gathering manufacturing upturn," Williamson said. "The latter is also driving interest in basic materials, as factories are starting to buy more inputs."

Investors remained least confident about the outlook for real estate and utilities in April.