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.
| Trader confidence trends | 4Q ‘23 | 1Q ‘24 | 2Q ‘24 | 3Q ‘24 |
| Good time to invest | 41% | 49% | 48% | 59% |
| Better off financially | 33% | 54% | 55% | 60% |
| Confident in decision-making | 64% | 68% | 69% | 69% |
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.
| Bullish Sector Sentiment | 2Q ‘24 | 3Q ‘24 |
| Information Technology | 51% | 61% |
| Energy | 64% | 57% |
| Health care | 40% | 49% |
| Utilities | 37% | 45% |
| Finance | 30% | 40% |
| Communications | 29% | 37% |
| Consumer Discretionary | 20% | 23% |
| Real Estate | 19% | 21% |
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.
| Bullish sentiment over next three months | 1Q ‘24 | 2Q ‘24 | 3Q ‘24 |
| Artificial intelligence stocks | 61% | 56% | 62% |
| Domestic stocks | 52% | 51% | 59% |
| Growth stocks | 50% | 47% | 58% |
| Mega cap tech stocks | 49% | 47% | 57% |
| Equities in general | 48% | 50% | 57% |
| Value stocks | 54% | 49% | 53% |
| Spot Bitcoin ETFs | N.A. | N.A. | 22% |
| Spot ether ETFs | N.A. | N.A. | 21% |
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.
| Primary concerns within the next three months | 2Q ‘24 | 3Q ‘24 |
| The political landscape in Washington D.C. | 15% | 20% |
| Market is due for a correction | 13% | 13% |
| Inflation | 19% | 10% |
| Geopolitical/global macro issues | 11% | 8% |
| AI bubble | 3% | 7% |
| Potential of a recession | 4% | 7% |
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.”
Source: Charles Schwab
