Sixty-three percent of experienced investors in a new survey by E-Trade believe the bull market still has room to run, up three percentage points from the third quarter and up eight points from a year ago.
Two-thirds of survey respondents said they expected the market to rise by 5% or more in the fourth quarter, way up from the 54% who said this in the 2016 fourth quarter.
Recent research showed that regulatory and political risk were driving investors to equities.
Fifty-nine percent of investors in the E-Trade study saw the U.S. economy as healthy enough for at least one more interest rate hike in the fourth quarter, up one percentage point from the previous quarter and six points from a year earlier.
“If the market has illustrated anything in the past few months, it’s that it can take some punches,” Mike Loewengart, E-Trade Financial’s vice president of investment strategy said in a statement.
“And despite historically high valuations, further potential Fed action, natural disasters and significant geopolitical uncertainty at home and abroad, retail investors still appear to be eyeing opportunity as 2017 draws to a close.”
Research Now conducted the survey in early October among an online U.S. sample of 918 self-directed active investors who manage at least $10,000 in an online brokerage account.
Forty-six percent of investors surveyed thought information technology had the most potential in the fourth quarter.
E-Trade noted that despite two bouts of “tech wreck” in June and July, the IT sector has performed well this year. Investors, it said, may be taking a longer view and seeing the summer dips as a buying opportunity.
Investor interest in energy remained steady at 44%, down two points from the previous quarter, as stronger crude oil prices helped push the sector to recent highs.
Likewise, health care is favored by 43% of investors, up from 41% in the third quarter.
Financials, however, dropped to 39% favorability from 43%.
E-Trade reported that interest in foreign assets continued to gain momentum as both developed and emerging market equities have largely outperformed their U.S. counterparts this year.
The appeal of markets outside the U.S. to investors has steadily risen, from 40% in the 2016 final quarter to 54% in the current fourth quarter.