Inflation concerns decline nearly ten points from the second quarter

Traders are feeling better about the markets than they have any time in the past two years with 56% reporting a bullish outlook for the next three months, up ten points from the second quarter. This is according to the latest Charles Schwab Trader Sentiment Survey, a quarterly survey that explores the outlooks, expectations, and perspectives of traders at Charles Schwab.

Trader optimism extends beyond the short-term market outlook, with nearly six in ten traders feeling it is a good time to invest (up 11 points QoQ) and more than half saying they are better off financially compared to a year ago (up five points QoQ and seven points YoY). Additionally, most traders (69%) are confident in their decision-making.

Inflation, which was traders’ top concern last quarter, fell to third place while expectations for Fed rate cuts increased. Thirty-three percent of those surveyed expect rate cuts of 50 basis points or more in the remainder of the year, up from 25% of respondents predicting such cuts last quarter.

“Coming into the third quarter, traders reported higher levels of optimism about the markets and economy – and continued confidence in their own decision-making,” said James Kostulias, head of Trading Services at Charles Schwab. “While we have seen increased market volatility since fielding our Q3 survey, we’re seeing some longer-term positivity among traders, and they are in a better position than ever before to manage volatility and market risks in a nuanced way thanks to the insights, education, and professional-grade platforms and tools at their fingertips.”

Sector and asset class views

Traders favored AI stocks (62%) with bullishness toward the segment increasing six points from Q2. They point to Information Technology (49%) as the sector that will be most impacted by the rise of AI, followed by Health Care (15%).

Looking across sectors, traders were most bullish toward Information Technology followed by Energy, Health Care, and Utilities. They were least bullish on Real Estate and Consumer Discretionary.

When asked about asset classes and styles, traders reported increasingly positive sentiment toward growth stocks, mega cap tech, domestic stocks, and equities in general. Fewer traders were bullish on spot Bitcoin ETFs and spot ether ETFs.

Looking at which instruments traders are considering trading in Q3, a modest percentage are interested in trading spot Bitcoin ETFs (13%) and spot ether ETFs (11%). Most are considering trading options (65%) and almost half (48%) plan to trade AI stocks.

Election comes into focus

The political landscape in D.C. is a top concern among traders, followed by worries that the market is due for a correction.

Most traders (94%) believe the presidential election will have at least some impact on financial markets. As the election approaches, almost half (44%) say they are reducing risk in their portfolio and 25% are engaging in options hedging to navigate the election’s impact in advance.

“A lot has happened in the election in the past few weeks, and traders will continue to be hit with a constant stream of news between now and Election Day,” said Kostulias. “What we see from our survey data is that traders plan to take a measured approach to trading in relation to the election. A sizeable portion are taking steps to manage risk, and even more are leaving the election out of their trading plans–a good indication that they are paying close attention but not being overly reactive.”

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 1,040 Active Trader clients at Charles Schwab between the ages of 18-75 and was fielded from July 9-19, 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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