Schwab Q3 Trader Sentiment Survey: Most Traders See a Recession Beginning This Year
Inflation continues to drive bearish sentiment although trader confidence remains high
Traders’ primary Q3
Likelihood of a
of a recession
Hedging against down
Less than 3 months
Moving assets out of stock market
3 – 6 months
The DC political landscape
6 – 12 months
1 – 3 years
|Unlikely||1%||3+ years||3%||Not Hedging Against Recession||42%|
|Highly unlikely||1%||Shifting Allocations or Other Actions|
“Recession fears surpassed domestic and geopolitical worries in the third quarter amid ongoing concerns about inflation,” said
Inflation continues to drive bearish sentiment
Traders have a more bearish outlook for the current quarter (59% are bearish vs 53% in Q2) with young traders experiencing the most significant dip in optimism. Only 28% of young investors report a bullish outlook for the US stock market, down 11% from the previous quarter.
Inflation remains the top concern around money and investing for traders (21%), but most think it will ease by the end of 2023 (79%). Likewise, most traders think the Fed will slow the pace of interest rate increases as we move through the remainder of the year.
Expected interest rate change at Fed meeting
Expected timing for inflation to ease
Increase more than .50 points
Increase .50 points
Increase .25 points
Overall, traders are confident in their ability to weather the storm. Of the traders who think the market is due for a significant correction, most (69%) are confident that they have a plan to withstand it. Half think it’s a good time to invest and 64% of traders overall are confident in their decision-making.
“This is the first time some young traders are riding out a more prolonged bear market, so it’s no surprise their optimism took a hit,” Metzger continued. “The good news is that across generations, traders are confident in their ability to navigate challenging markets, which speaks to their mindset, but also the level of access they have to exceptional tools, resources and education to help them develop trading strategies and make decisions.”
Sectors and Asset Classes
Traders are broadly optimistic about Healthcare, Energy and Utilities, and though at a sector level many are bearish on Finance, a strong cohort believe Tech (39%) and Finance (27%) can be bought at a discount right now.
Bullish over the next three months
Bullish and currently at a discount
Bearish over the next three months
Half of traders are bullish on value stocks, and about half are bearish on growth stocks (52%), international stocks (53%) and equities in general (52%). Traders are also notably bearish on meme stocks (63%) and cryptocurrencies (63%). Few traders plan to buy cryptocurrency and for those who do, most are not first-time crypto investors.
Buying the crypto dip
Own it and buying more
Buying for first time
Own it but not investing in more
Do not own it and have no plans to
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