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Retail traders are showing the highest level of optimism in two years, according to a Charles Schwab (NYSE:SCHW) survey, with 56% reporting a bullish outlook for markets over the next three months, up from 46% in Q2.
The increased bullishness comes as inflation concerns eased in Q3 vs. Q2, while expectations for rate reductions by the Federal Reserve rose. Some 33% of survey respondents expect rate cuts of 50 basis points or more in the remainder of the year, up from 25% of those surveyed predicting such cuts last quarter.
“While we have seen increased market volatility since fielding our Q3 survey, we’re seeing some longer-term positivity among traders,” said James Kostulias, head of Trading Services at Charles Schwab.
By sector, traders were most bullish on information technology (NYSEARCA:XLK), followed by energy (NYSEARCA:XLE), health care (NYSEARCA:XLV), and utilities (NYSEARCA:XLU). They were least bullish on real estate (NYSEARCA:XLRE) and consumer discretionary (NYSEARCA:XLY).
Most traders continued to favor artificial intelligence-linked stocks, the Charles Schwab Trader Sentiment Survey showed, with bullishness toward the segment increasing six points Q/Q to 62%. They point to information technology as the sector that will be most impacted by the rise of AI, followed by health care.
When surveyed about asset classes and investment styles, traders expressed a growing positive sentiment toward growth stocks, mega-cap tech, domestic equities, and the broader equity market. However, there was a noticeable decline in bullishness toward spot bitcoin (BTC-USD) exchange-traded funds and spot ether (ETH-USD) ETFs.
Seeking Alpha’s August Sentiment Survey showed most investors expect the S&P 500 (SP500) to close out 2024 higher than its current level.
