Two-thirds of traders still believe a U.S.
recession is at least somewhat likely in 2024, but many also expect
inflation to come down or remain the same
For the first time all year, the political
landscape in Washington, D.C. is the top concern among traders,
exceeding the rate environment and the potential for recession
Sentiment among traders has turned bearish, but is still more
bullish than it was this time last year, according to the latest
Charles Schwab Trader Sentiment Survey, a quarterly study that
explores the outlooks, expectations, and perspectives of traders at
Charles Schwab and TD Ameritrade. The survey found 32% of traders
are bullish on the U.S. stock market and 53% are bearish, compared
to 44% who said they were bullish and 35% who said they were
bearish in Q3. This time last year, only 18% were bullish on U.S.
stocks and 68% were bearish.
One factor clearly having an impact on traders is the political
landscape in Washington, D.C. For the first time this year it is
traders’ top concern, exceeding the possibility of more rate
increases and the potential for recession.
Primary concerns around
investing
4Q ‘23
3Q ‘23
2Q ‘23
1Q ‘23
Political landscape in D.C.
21%
13%
13%
12%
Fed raising interest rates
16%
14%
10%
16%
Potential of a recession
11%
14%
18%
15%
Inflation
11%
10%
8%
12%
Market correction
8%
10%
7%
6%
Cautious stance
Overall, 41% of traders think it’s a good time to invest in
stocks, mutual funds and other equity-based investments, down from
51% in Q3 2023.
With respect to the economy, two-thirds of traders still believe
a US recession in 2024 is at least somewhat likely. At the same
time, many more traders expect inflation to recede next year as
compared to those who think it will rise.
Likelihood of a US recession in
2024
Expected inflation scenarios in
2024
Likelihood the Fed will achieve a “soft
landing” in 2024
Very likely
23%
Inflation declines rapidly
3%
Very likely
3%
Somewhat likely
43%
Inflation comes down moderately
40%
Somewhat likely
35%
Somewhat unlikely
17%
Inflation remains at current levels
31%
Somewhat unlikely
31%
Very unlikely
6%
Inflation goes up moderately
15%
Very unlikely
21%
I don’t know
11%
Inflation rises rapidly
2%
I don’t know
11%
I don’t know
9%
“The confluence of factors facing markets today from monetary
policy to government uncertainty to, most recently, geopolitical
uncertainty has led some traders to take a more cautious stance,”
said James Kostulias, head of Trading Services at Charles Schwab.
“However, glimmers of economic optimism are emerging as we head
toward the end of the year and look ahead to 2024.”
Sector and asset class outlook
At the sector level, traders continue to be most bullish about
energy (55%), followed by IT (42%) and Healthcare (42%), and most
bearish about real estate (68%), consumer discretionary (50%), and
finance (51%).
They are relatively bullish on value stocks (47%), AI stocks
(45%), and fixed income investments (40%), and relatively bearish
on crypto (43%) and international stocks (42%).
What traders are doing in their portfolios
Traders’ expectations for the economy are leading many to dial
back on risk exposure. Still, they are more than twice as likely to
be planning to move money into their investment portfolio than take
money out.
Impact of Expectations for the Economy
on Trading Approach
Portfolio Changes Planned in Next 3
Months
Moderating/Dialing back risk exposure
44%
Move money net
72%
Spending more time researching trades
before executing
33%
Into individual stocks
45%
Spending more time vetting trades with
tools available to me
27%
Into ETFs
33%
Moving assets into bonds
16%
Into fixed income investments
26%
Moving assets into the stock market
16%
Into cash investments
23%
No impact
17%
Into another type of investment
vehicle
16%
Fewer traders (33%) feel like their financial standing has
improved in the last year, down from 53% last quarter who felt
better off financially compared to a year ago.
“A positive trend we continue to see among our trader clients is
their level of engagement with educational content and research as
part of their trading approach,” noted Kostulias. “A third of
traders are spending more time researching trades before executing,
and more than a quarter are vetting strategies with the tools we
provide in order to navigate the complexity of today’s market
environment and economy.”
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 and TD Ameritrade –
defined as those making more than 80 equity trades, more than 12
options trades, or those who make futures or forex trades over the
course of the year. The study included 853 Active Trader clients at
Charles Schwab and TD Ameritrade between the ages of 18-75 and was
fielded from October 3 - 9th, 2023.
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
Investing involves risk, including loss of principal.
Charles Schwab & Co., Inc. ("Schwab") and TD Ameritrade,
Inc., members SIPC, are separate but affiliated subsidiaries of The
Charles Schwab Corporation. TD Ameritrade is a trademark jointly
owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion
Bank.
1123-3LA2
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Margaret Farrell Charles Schwab (203) 434-2240
Margaret.farrell@schwab.com
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