A third of traders don’t expect inflation to ease until 2024 at the earliest
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
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Expectations for
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Hedging against inflation
|
|
Hedging against
|
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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% |
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|
|
|
|
|
|
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
|
|
Impact on trading strategy if oil prices continue to
|
||
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/
Contacts
Margaret Farrell
Charles Schwab
(203) 434-2240
Margaret.farrell@schwab.com
