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.

“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.

“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.

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.

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.

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