• Investors have held the lowest rate of optimism for stocks for over a year, according to E-Trade.
• Inflation tops the list of concerns expressed by investors in the online broker’s fourth quarter Streetwise survey.
• But investors are seeing the energy sector expand its gains as oil and gas prices rise.

Investor enthusiasm for stocks has plummeted for the first time since the COVID-19 crisis unfolded in the United States last year as inflation hit multi-year highs, but the surge in prices of the gas and oil makes the energy sector more attractive, according to a quarterly survey from E-Trade.

Bullish sentiment fell 11 percentage points to 54%, a decline from the third quarter when sentiment peaked in three years, the trading platform said of its fourth-quarter Streetwise survey. The impact of inflation on investment portfolios was the main concern of respondents to the online survey that ran October 8-16, at 52%.

E-Trade’s final set of questions included, “If you had to pick one movie title that best describes how you personally feel about the market this quarter, which one would it be?” The best response, at 27%, was “Dazed and Confused,” the 1993 coming-of-age comedy whose cast included Ben Affleck and Matthew McConaughey.

“Investors face several headwinds when it comes to their portfolios, so it’s not too surprising to see optimism take a hit,” said Mike Loewengart, Managing Director of Investment Strategy at E-Trade, in a statement released Monday accompanying the publication of the investigation.

Inflation has risen in recent months as retail and wholesale prices come under pressure in part due to supply chain issues that cross many industries and a shortage of labor, even as millions of Americans remain unemployed as a result of the coronavirus outbreak. Labor shortages have forced many companies to raise wages to attract workers.

“Many wonder if inflation is here to stay, supply constraints have weighed heavily on purchasing power and the slowing growth outlook appears to be more of a reality,” Loewengart said. The consumer price index in September climbed to 5.4%, remaining around a 30-year high, and wholesale inflation climbed to 8.6% year-on-year.

Investors at a 66% rate expect market volatility to pick up again in the next quarter, up from 64% in the previous quarter.

“But investors should keep in mind that volatility is part of a healthy market and that preparing for downturns is essential.”

In such preparation, two in five investors, or 44%, said the energy sector has the greatest potential for gains, up from 37% in the third quarter. Strong demand resulting from reopenings and supply shortages, E-Trade said, has helped push prices at the pump to seven-year highs. U.S. and Brent crude oil prices hit roughly three-year highs, trading above $ 83 per barrel and $ 85 per barrel, respectively.

Investors also see opportunities in the information technology and healthcare sectors, the online broker said. The energy sector of the S&P 500 jumped 90% in 2021.

The E-Trade survey, administered by online market research firm Dynata, looked at an online US sample of 901 active self-directed investors who manage at least $ 10,000 in an online brokerage account. The margin of error was plus or minus 3.2%.