Scenes from SmartCon and Investor Sentiment Insights

According to the Charles Schwab Q3 Trader Sentiment Survey, most traders (56%) are bullish on the short-term market outlook. What is contributing to their more optimistic outlook — cooling inflation, Fed cutting rates, other factors? And why do you think younger investors more bullish than mid-life, mature and retired investors?

The decline in inflation has certainly led to increased confidence from investors as only 10% listed inflation as their primary concern in our Q3 Trader Sentiment Survey. That said, inflation is still a widely monitored economic data point for traders and investors as 32% of traders and investors we surveyed in September said the inflation rate was the economic data point they would be watching closest in October.

Another reason for the continued bullish posture among traders is increasing confidence that the U.S. will avoid a recession (57% saw a recession as unlikely in 2024). In September, only 14% of traders/investors said they see a “hard landing” as the most likely outcome for the economy in the next 12 months.

As for the demographic differences, there are several factors. One, of course, is the differences in investment goals between younger investors and older investors who are nearing retirement. Another likely factor is that younger investors have grown accustomed to bouts of equity market volatility being relatively short lived and presenting opportunities to “buy the dip” – whereas an older investor may have memories and experiences navigating more prolonged bear markets, like the Dot Com bubble and the Great Recession of ’08 and ’09.

Traders also reported that they are more confident in their decision-making. What’s driving this confidence and why do many believe now is a good time to invest?  

There are several factors that are likely playing into this trend of trader confidence. The first factor is traders’ own financial stability as nearly half of the survey respondents planned to add money into their investment portfolios over the next three months compared to only 18% planning to take money out of their investment portfolio over the next three months. Add to that, trader market sentiment has improved and inflation fears have receded, leading many to believe now is a good time to invest. Finally, the vast availability of investment education and market commentary – like the deep well of research and content we make available to investors at Schwab – and leading-edge trading platforms like thinkorswim have created a landscape where investors have all the tools that they need to be successful self-directed investors at their fingertips.

Beyond the survey, what market and investor sentiment trends are you watching for as we close out 2024?

AI continues to be an interesting area to watch. Sixty-two percent of our Trader Sentiment survey respondents stated that they are bullish on AI stocks. Nearly half of the respondents said they are considering trading these names.

Finally, the election is coming into focus and is on the minds of traders. Twenty percent of our survey respondents highlighted the political landscape in Washington, D.C. as their primary concern over the next three months and 94% of traders expect the election will impact the financial market. Roughly one in three started making changes to their strategy such as reducing risk and engaging in hedging using options strategies. However, according to a survey we fielded in August, only 12% of investors/traders said they would be making trading decisions based on short-term news about the 2024 U.S. presidential election.