Schwab Q2 Trader Sentiment Survey: More Than Half of Traders Say the Market is Due for a Significant Correction in the Second Quarter

A third of traders don’t expect inflation to ease until 2024 at the earliest

WESTLAKE, Texas--(BUSINESS WIRE)-- The latest Charles Schwab Trader Sentiment Survey reveals that more than half (53%) of traders say the market is due for a significant correction in the second quarter of 2022, and fewer than a third (30%) think the market will perform well. Six in 10 (61%) traders remain confident in their investment decision-making, although less than half (43%) feel it’s a good time to invest in equities. Chief among traders’ concerns are inflation and the geopolitical landscape, and they’re taking specific actions to hedge against both. While most traders (68%) expect sooner relief, nearly one third (32%) of traders don’t expect inflation to ease until 2024 at the earliest.

The Charles Schwab Trader Sentiment Survey is a quarterly study that explores the outlooks, expectations, and trading perspectives of traders at Charles Schwab and TD Ameritrade. It found:

Traders’ primary Q2 concerns			Expectations for when inflation will begin to ease			Hedging against inflation with…			Hedging against geopolitical risk by…
Inflation	20%		2022	23%		Real estate / REITS	32%		Moving assets to cash	28%
Geopolitics	15%		2023	45%		Gold	20%		Buying gold	15%
Potential recession	12%		2024	18%		Crypto or related products	18%		Buying crypto	11%
The DC political landscape	12%		2025+	14%		Agricultural commodities	15%		Moving out of emerging markets	8%
						Not hedging against inflation	44%		Not hedging against geopolitical risk	48%

“Overall, in the second quarter, market sentiment among traders is unquestionably skewing bearish,” said Barry Metzger, Head of Trading and Education at Charles Schwab. “But traders see opportunities in these kinds of markets. Despite the headwinds, most remain confident in their decision-making, and in their ability to meet their personal financial goals.”

Russian Bear

The conflict in Ukraine is top of mind for traders, with more than half (56%) anticipating a “Russian Bear” by the end of the year, meaning the major markets (Dow, S&P, Nasdaq) will finish 2022 in bear territory largely because of the conflict.

Expected likelihood of a “Russian Bear”			Expected size of the “Russian Bear”
Highly likely	5%		Small (1%-10% drop)	23%
Likely	15%		Medium (10%-20% drop)	60%
Somewhat likely	36%		Large (20%+ drop)	17%
Somewhat unlikely	21%
Unlikely	12%
Highly unlikely	5%
Don’t know	6%

Green Energy

Although overall sentiment is more bearish, traders do see investing opportunities when digging into certain categories and sectors. With oil prices surging, traders anticipate an acceleration on the horizon for Green Energy. If prices continue to rise, half of traders (50%) expect to adjust their trading strategy in response.

Likelihood fossil fuel market disruption leads to acceleration in green energy sector in 2022			Impact on trading strategy if oil prices continue to rise
Highly likely	9%		Will invest more in energy equities	30%
Likely	14%		Will invest more in clean energy equities	18%
Somewhat likely	29%		Will increase exposures to safe havens	11%
Somewhat unlikely	15%		Won’t change strategies	50%
Unlikely	15%
Highly unlikely	12%
Don’t know	7%

Sectors and Categories

At the sector level, traders are most bullish on Energy, Utilities, Materials and Health Care. They’re most bearish about Consumer Discretionary, Real Estate, Information Technology and Finance.

Most bullish about…			Most bearish about…
Energy	70%		Consumer Discretionary	51%
Utilities	54%		Real Estate	50%
Materials	51%		IT	40%
Health Care	51%		Finance	36%
Consumer staples	48%		Communications	35%
			Industrials	31%

At the thematic level, traders are most bullish on Cyber Security and Defense Contracting, and most bearish on Automated Cars and the Space Economy

Most bullish about…			Most bearish about…
Cyber Security	71%		Automated Cars	28%
Defense Contracting	70%		The Space Economy	26%
Agriculture	57%		Online Gaming	24%
Artificial Intelligence	56%		ESG	22%
Renewable Energy	55%		Blockchain	18%

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 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 845 Trader clients at Charles Schwab and TD Ameritrade between the ages of 18-75 and was fielded from April 6-17, 2022.

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 Twitter, Facebook, YouTube, and LinkedIn.

Disclosures

Investing involves risk including loss of principal.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220511005223/en/

Margaret Farrell

Charles Schwab

(203) 434-2240

Margaret.farrell@schwab.com

Source: The Charles Schwab Corporation