Schwab Survey: Bullish Sentiment Declines Among Retail Traders in Q2 as Inflation Concerns Rise

Rhea-AI Summary

The second quarter of 2024 saw a decline in bullish sentiment among retail traders at Charles Schwab. According to the latest Charles Schwab Trader Sentiment Survey, only 46% of traders were optimistic about the U.S. stock market, down from 53% in Q1 2024. Inflation worries surged, with 19% of traders citing it as a primary concern. Political landscape and potential market correction were also significant concerns. Bearish sentiment increased notably among younger and mid-life investors.

Traders' expectations for rate cuts moderated, with only 43% expecting up to 50 basis points in rate cuts. Confidence in decision-making reached an all-time high of 69%, with more traders spending time researching and vetting trades. Bullishness remained strong in sectors like energy and information technology, while bearish views prevailed in real estate and consumer discretionary sectors. Additionally, a growing number of traders plan to add money to their portfolios in the next three months.

Positive

• Traders' confidence in decision-making hit a new high at 69%.
• 41% of traders are spending more time researching trades, up from 28% in Q1 2024.
• 33% are using Schwab's tools to vet trades, an increase from 20% in Q1 2024.
• 64% of traders are bullish on the energy sector over the next three months.
• 48% of traders plan to add money to their portfolios, up from 38% in Q1 2024.

Negative

• Bullish sentiment on the U.S. stock market fell to 46% in Q2 from 53% in Q1 2024.
• Inflation concerns more than doubled quarter-over-quarter, reaching 19%.
• Bearish sentiment increased significantly among young and mid-life investors, each group rising by more than 15%.
• Moderation in expectations for rate cuts: Only 43% expect up to 50 basis points in cuts.
• 44% of traders believe AI stocks are overcrowded or over-bought.
• Bullish sentiment on growth and value stocks ticked downward.

WESTLAKE, Texas--(BUSINESS WIRE)-- Sentiment among traders dipped in the second quarter of 2024 but remained higher than 2022 and 2023 levels according to the latest Charles Schwab Trader Sentiment Survey, a quarterly study that explores the outlooks, expectations, and perspectives of traders at Charles Schwab. Of those polled, 46% reported a bullish outlook on the U.S. stock market, down from 53% in the first quarter. Bearish sentiment varied by age, but compared to last quarter, increased significantly among young and mid-life investors, jumping more than 15% for each group.

Trader expectations for rate cuts moderated significantly compared to last quarter, with 43% expecting up to 50 basis points in rate cuts (up from 34%), 20% expect 51-100 basis points in cuts (down from 47%) and only 5% expect cuts over 100 basis points (down from 20%). A further 32% believe the Fed will not cut rates this year, up from 10% last quarter.

Trader concerns and confidence

Inflation concerns have risen substantially among traders, more than doubling quarter-over-quarter. The political landscape came in as the second biggest concern, followed by worries that the market is due for a significant correction.

Primary concerns around investing		2Q ‘23		3Q ‘23		4Q ‘23		1Q ‘24		2Q ‘24
Inflation		8	%	10	%	11	%	9	%	19	%
Political landscape in D.C.		13	%	13	%	21	%	16	%	15	%
Market correction		7	%	10	%	8	%	9	%	13	%
Geopolitical or global macroeconomic issues		10	%	8	%	5	%	18	%	11	%
Fed holding rates steady		n/a		1	%	3	%	6	%	6	%
Uncertainty/potential increase in market volatility		6	%	7	%	7	%	9	%	5	%
Potential of a recession		18	%	14	%	11	%	9	%	4	%

“Traders began the year feeling pretty confident that the economy was improving and Fed rate cuts would be quick to follow,” said James Kostulias, head of Trading Services at Charles Schwab. “But inflation concerns have jumped significantly. While about half of traders believe we’ll avoid a recession this year, overall stock market sentiment cooled a bit in Q2 as those concerns took hold and expectations for rate cuts were significantly dialed back as key drivers like the Consumer Price Index indicated inflation was once again on the rise in March.”

Traders’ confidence in their decision-making hit a new high with 69% describing themselves as confident. Compared to last quarter, significantly more respondents say they are spending more time vetting or researching trades, using tools such as those available through Schwab and its trading platforms, as a result of their expectations for the economy.

Impact of expectations for the economy on trading approach	1Q ‘24		2Q ‘24
Spending more time researching trades before executing	28	%	41	%
Spending more time vetting trades with tools available to me	20	%	33	%

“We saw a significant uptick this quarter in traders who say they are spending more time researching trades before executing them,” said Kostulias. “Trader education is a huge part of what we offer at Schwab because we know that when traders have valuable information at their fingertips, they actively use it to inform their investing decisions, and that contributes to a high level of confidence in their ability to reach their investing goals.”

Sector and asset class outlook

Most traders (64%) are bullish on the energy sector over the next three months, followed by information technology (51%), materials (40%) and health care (40%). On the flipside, traders are most bearish on real estate (52%) followed by consumer discretionary (43%), and finance (34%).

Traders remain bullish on AI stocks though 44% believe AI is the most “crowded,” or over-bought, trade. Sentiment toward mega cap tech and equities in general came in roughly flat quarter-over-quarter, while bullishness toward both value stocks and growth stocks ticked slightly downward.

Bullish Sentiment over next three months	1Q ‘24		2Q ‘24
Artificial intelligence stocks	61	%	56	%
Mega cap tech stocks	49	%	47	%
Equities in general	48	%	50	%
Value stocks	54	%	49	%
Growth stocks	50	%	47	%

Most traders (63%) said they were considering trading options in Q2, but few (13%) were planning to trade short-dated or zero days-to-expiration options, despite reported growth in the use of these strategies over the past year. Traders also displayed caution toward cryptocurrency with only 15% considering trading cryptocurrency in Q2.

Significantly more traders say they plan to add money to their investment portfolio over the next three months (48%, up from 38% in Q1). Other top near-term plans include moving money into individual stocks and moving money into ETFs.

Portfolio Changes Planned in Next 3 Months	4Q ‘23		1Q ‘24		2Q ‘24
Move money into individual stocks	45	%	52	%	53	%
Add money into my portfolio	38	%	38	%	48	%
Move money into ETFs	33	%	39	%	41	%
Move money into fixed income investments	26	%	27	%	23	%
Move money into cash investments	23	%	20	%	23	%

About the Charles Schwab Trader Sentiment Survey

The Charles Schwab Trader Sentiment Survey is a quarterly study exploring the outlooks, expectations, trading patterns and points of view of active traders at Charles Schwab (clients who actively trade equities or trade options, futures, or forex). The study included 920 active trader clients at Charles Schwab between the ages of 18-75 and was fielded from April 10 - 19, 2024.

About Charles Schwab

At Charles Schwab, we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.

More information is available at aboutschwab.com. Follow us on X, Facebook, YouTube, and LinkedIn.

Disclosures

Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.

Historical data should not be used alone when making investment decisions. Please consult other sources of information and consider your individual financial position and goals before making an independent investment decision.

All investments involve risk including the possible loss of principal. Please consider all risks and objectives before investing.

0524-37B4

View source version on businesswire.com: https://www.businesswire.com/news/home/20240523392616/en/

Margaret Farrell

Director, Corporate Communications

(203) 434-2240

margaret.farrell@schwab.com

Source: The Charles Schwab Corporation

FAQ

What is the current bullish sentiment among Schwab retail traders in Q2 2024?

The bullish sentiment among Schwab retail traders in Q2 2024 is 46%, down from 53% in Q1 2024.

How have inflation concerns changed among Schwab traders in Q2 2024?

Inflation concerns among Schwab traders have more than doubled quarter-over-quarter, reaching 19% in Q2 2024.

What sectors are Schwab traders most bullish on in Q2 2024?

Schwab traders are most bullish on the energy sector (64%), followed by information technology (51%), materials (40%), and health care (40%).

How has bearish sentiment changed among Schwab traders in Q2 2024?

Bearish sentiment increased notably among young and mid-life investors, with each group's bearish sentiment rising by more than 15% compared to the last quarter.

What are Schwab traders' expectations for Fed rate cuts in Q2 2024?

Only 43% of Schwab traders expect up to 50 basis points in rate cuts in Q2 2024, while 32% believe the Fed will not cut rates this year.

What percentage of Schwab traders are planning to add money to their portfolios in Q2 2024?

48% of Schwab traders plan to add money to their portfolios in Q2 2024, up from 38% in Q1 2024.