Schwab Q3 Trader Sentiment Survey: Recession Expectations Start to Recede as Trader Outlook Brightens in the Third Quarter

Rhea-AI Summary

Traders more bullish on US stock market, recession expectations decrease. 44% bullish and 35% bearish for next 3 months. 69% expect recession, down from 86% in Q2. Concerns include inflation, Fed raising interest rates, and consumer spending. 51% think it's a good time to invest. Bullish on energy, IT, and healthcare sectors. AI seen as important in decision-making.

Positive

• Traders more bullish on US stock market
• Recession expectations decrease
• 51% think it's a good time to invest
• Bullish on energy, IT, and healthcare sectors
• AI seen as important in decision-making

Negative

• None.

More than half think it’s a good time to invest and feel better financially

WESTLAKE, Texas--(BUSINESS WIRE)-- After two consecutive quarters of recession anticipation, trader expectations are shifting to a more optimistic sentiment overall about the market environment. The latest Charles Schwab Trader Sentiment Survey reveals that traders are more bullish on the U.S. stock market than they were in the second quarter; for the next three months, 44% are bullish and 35% are bearish, compared to 32% bullish and 52% bearish in Q2.

While most (69%) of Schwab’s trader clients still think it’s likely that the U.S. economy will officially enter a recession, that figure is down significantly from 86% in Q2 and 87% in Q1. Those who think a recession is likely are also pushing back their expectations for when it will begin and continue to believe it will last less than one year. Among traders expecting a recession, 64% now predict it will start in Q4 2023 (26%) or later (38%) compared to just 19% who predicted a recession would begin in that timeframe last quarter.

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

Primary concerns around investing				Likelihood of a recession				Expected length of a recession				Economic data influencing outlook
Potential of a recession	14%			Certain	10%			6 months or less	22%			Inflation	77%
Fed raising interest rates	14%			Highly likely	22%			6 – 12 months	42%			Consumer spending	63%
Political landscape in D.C.	13%			Somewhat likely	37%			1 – 2 years	29%			Labor market	55%
Inflation	10%			Somewhat unlikely	18%			More than 2 years	9%			Consumer debt	43%
Market correction	10%			Highly unlikely	4%							Housing market	38%

“While traders certainly don’t feel we’re entirely out of the woods yet when it comes to an economic downturn, we’re seeing an influx of cautious optimism,” said James Kostulias, head of Trading Services at Charles Schwab. “This is no doubt thanks to a sunnier economic picture overall this quarter. The jobs market may be cooling somewhat, but it continues to be strong, and unemployment remains remarkably low, especially compared to pandemic-era highs. Even the most recent inflation numbers, while they do indicate a modest rise, are a far cry from the highs we saw in 2022. Concerns may remain, but bullishness is on an upswing.”

Signs of Optimism

Mid-life and older traders are the most bullish (49%) while that number drops to 41% for younger traders and 38% for retirees. While bearishness is on the decline, one in five traders express uncertainty about their market outlook. That lack of clarity is even higher (one in four) among retirees.

Overall, 51% of traders think it’s a good time to invest in stocks, mutual funds and other equity-based investments, up from 41% in Q2. Additionally, 53% feel they are better off financially than they were a year ago compared to only 36% in the previous quarter. Traders largely continue to feel confident in making investment decisions (63%), a number that remains virtually unchanged quarter-over-quarter.

“Retired and younger investors can be particularly sensitive to market swings, so it makes sense that they might feel a little less bullish compared to mid-life and mature investors who have experienced many market cycles over their lifetimes,” said Kostulias. “This experience could lead mid-life and mature traders to feel more comfortable taking calculated risks. This is just one area where the many educational resources and trading tools available at Schwab can make a big difference, and traders are taking advantage of these. Traders say they are now spending more time researching their trades before executing, and our tools can help them to ideate, create, execute, and monitor their trades under multiple conditions and scenarios.”

Sector and asset class outlook

At a sector level, traders are the most bullish on energy (51%), information technology (51%, a significant bump from 38% in Q2) and health care (47%). Real estate is the only sector that the majority of traders are bearish on (54%).

At the asset class level, many traders are bullish on value stocks (46%), domestic stocks (44%), growth stocks (42%) and equities in general (40%). Traders are slightly less bullish on fixed income than the previous quarter, as sentiment ticked down from 42% to 35%.

AI’s impact

Artificial intelligence (AI) is emerging as an important factor in traders’ decision-making, in terms of both the companies they invest in and how they feel the technology will influence the market. Two-thirds of traders (66%) see AI as potentially having a massive or significant impact on the market and 35% are already factoring company use of AI into their stock analysis. Just over half of traders (51%) are bullish on AI stocks for the next three months.

Factoring company use of AI into stock analysis			Massive or significant impact of technologies over next 1 – 3 years
Yes	35%		Artificial intelligence	66%
No	45%		Quantum computing	41%
Not sure/don’t know	20%		Blockchain	21%
			Virtual/augmented reality	19%
			The Metaverse	13%

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 768 Active Trader clients at Charles Schwab and TD Ameritrade between the ages of 18-75 and was fielded from July 6 – August 3, 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 Twitter, Facebook, YouTube, and LinkedIn.

Disclosures
Investing involves risk including loss of principal.

(0823-3PTD)

View source version on businesswire.com: https://www.businesswire.com/news/home/20230823544589/en/

Margaret Farrell

Charles Schwab

(203) 434-2240

Margaret.farrell@schwab.com

Source: The Charles Schwab Corporation