Trader Bullishness Ticks Downward as Younger Traders Take a More Cautious Stance

Key Terms

stagflation technical

A period when economic growth stalls or moves very slowly while prices rise, producing the unusual mix of high inflation and weak job or income gains. For investors, stagflation matters because it erodes the real value of cash and bonds, squeezes corporate profits, and makes standard policy fixes less effective; think of it like running on a treadmill that suddenly gets steeper while you slow down, forcing different investment choices for protection and return.

Despite decline in sentiment, most traders still plan to buy the dip

WESTLAKE, Texas--(BUSINESS WIRE)-- Charles Schwab, a leader in investing and trading with $12.15 trillion in total client assets and more than nine million daily average trades, today announced the findings of its Q1 2026 Trader Sentiment Survey, which found that trader market sentiment declined modestly with 52% describing themselves as bullish, compared to 57% in Q4 2025. The dip was driven by traders at each end of the generational spectrum, with the most pronounced decline seen among younger traders.

Bullish outlook for U.S. stock market by life stage	Q4 2025	Q1 2026
Young traders (under 40)	54%	45%
Mid-life (40-55)	52%	51%
Mature (55+ not retired)	61%	56%
Retired	61%	55%

Like last quarter, nearly six in 10 traders (58%) believe the stock market is overvalued. Bullishness toward AI stocks, growth stocks, and domestic stocks declined, while sentiment toward commodities improved.

Bullish sentiment over next 3 months	Q4 2025	Q1 2026
AI stocks	64%	52%
Growth stocks	58%	53%
Domestic stocks	54%	50%
Commodities	43%	49%

The political landscape, geopolitical issues, and uncertainty related to the potential for a U.S. market correction are traders’ top concerns.

Despite market concerns, nearly seven in 10 traders (67%) remain confident in their decision-making.

“Trader sentiment continues to lean positive overall, though a stronger sense of caution is emerging—particularly among younger traders—alongside ongoing concerns that valuations have run too far,” said James Kostulias, Head of Trading Services at Charles Schwab. “Despite some concerns bringing traders’ sentiment down, we also see continued confidence in their ability to navigate challenges and ultimately, they appear to remain optimistic that there are opportunities for traders in this market.”

Trading Strategy and Sector Views

Eighty-three percent of traders say they are somewhat or very likely to buy the dip if there are notable market declines in the next three months. Nearly half (47%) describe themselves as somewhat or highly risk-seeking while nearly one-third (32%) are somewhat or highly risk-averse.

Despite concerns about valuations, 59% of traders say their outlook is leading them to increase exposure to equities. At the same time, 38% are increasing use of options, and 33% are increasing exposure to gold.

Corporate earnings, inflation data, tariff policy, and AI developments top the list of factors driving traders’ strategies. Forty-five percent pointed to AI stocks as the most crowded trade (a high concentration of positions).

At the sector level, sentiment toward Information Technology, Finance, and Communications declined, while traders grew more bullish on Materials, Industrials, and Consumer Staples.

Bullish sentiment over next three months by sector	Q4 ‘25	Q1 ‘26
Information Technology	61%	52%
Energy	58%	65%
Utilities	52%	54%
Finance	48%	41%
Materials	43%	54%
Industrials	40%	47%
Healthcare	40%	41%
Communications	38%	34%
Consumer Staples	32%	38%
Real Estate	23%	21%
Consumer Discretionary	18%	22%

Economic Outlook

Traders remain concerned about the labor market with 55% expecting it to moderately or significantly weaken in the first half of 2026. Fifty-two percent think inflation will hold steady – and half of traders (50%) see stagflation as somewhat or very likely. Despite those concerns, only one quarter (24%) expect a recession this year.

Recession outlook
Believe the U.S. is headed toward recession	24%
Don’t believe the U.S. is headed toward recession	49%
Unsure	26%

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 clients at Charles Schwab–who actively trade equities or trade options, futures, or forex. The study included 2,121 Active Trader clients at Charles Schwab and was fielded from January 20^th – January 27^th.

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

This material is intended for informational purposes only. The investment strategies mentioned may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decisions.

Investing involves risk, including loss of principal, and for some products and strategies, loss of more than your initial investment.

©2026 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.

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View source version on businesswire.com: https://www.businesswire.com/news/home/20260226878752/en/

Margaret Farrell

Director, Corporate Communications

(203) 434-2240

margaret.farrell@schwab.com

Source: The Charles Schwab Corporation