Here's why investors should consider putting money in the market now as optimism climbs, according to Vanguard's head of investor research

• Investors should consider moving cash into the market right now, according to Vanguard's global head of investor research and policy.
• Retail investors are trading less, which suggests a "stay the course" stance and more upbeat economic outlook, Fiona Greig explained. 
• In her view, investors can capitalize on the current landscape by increasing their savings rate and leaning more into employer-sponsored retirement accounts.

Investors are increasingly holding their positions in the market despite volatility, and that points to optimism for the broader economic outlook, according to Vanguard's global head of investor research and policy, Fiona Greig.

There has been lower retail trading activity recently, and that willingness to maintain positions suggests a more upbeat view for stocks, she told Insider in an interview.

"Yes, there's been volatility, but the longer-term outlook [investors] have for the stock market is stable," Greig said. "So unless they have a particular need to liquidate or pull out, investors are really staying the course, and I think that's good news."

In a Thursday note from Vanguard detailing investor behavior trends, data shows that investors in December expected stock returns in the next 12 months of 2.7%, up from a five-year low of 0.6% in October but still more pessimistic than a year ago.

And investors' expectations for returns over the next 10 years has been relatively stable, dipping to 7% last month from 7.2% in October, reinforcing Greig's view that near-term market tremors haven't yet deterred the majority of investors. The numbers show it's still a buy-and-hold environment.

"One way to read this is that rate hikes are priced in," Greig said. "Look at December's rate hike, it was a non-event in markets. That suggests to me that markets are expecting a moderation strategy for the Fed. There's some lower expectations for stock market returns in the short term, but we see pretty clear expectations and optimism for returns in the next 12 months, and even 10 years."

Ramp up savings rates for 2023

Climbing optimism indicates it could be a good time to consider moving cash into markets, which could be done with minimal risk and at a low cost, according to Greig. She said right now there's an opportunity to increase your savings rate and ramp up the allocation of funds.

"I would make sure to take advantage right now of employer-sponsored retirement plans," she said. 

The investment strategist added that it's important not to let volatility spook you into changing your strategy or shedding positions. Choppiness should be expected after a brutal year like 2022, she explained, and the ongoing debt ceiling standoff could bring further uncertainty.

"Stay the course," Greig said. "Don't let volatility and short-term fluctuations cause you to pull out unnecessarily."