Schwab Q4 Trader Sentiment Survey: A Recession May Already Be Here, But Traders Say It Will Be Short Lived
16 November 2022 - 1:00AM
Business Wire
Despite bearish outlook, 55% say a “January
Effect” is likely to drive markets higher at the start of 2023
The latest Charles Schwab Trader Sentiment Survey reveals that
nearly 60% of traders say it feels like the U.S. is in an economic
recession or will be by the end of 2022. Most (55%) say it will
last less than one year, but 45% say it will last longer than that.
While traders have a predominantly bearish outlook for the U.S.
stock market over the next few months, they are confident in their
ability to navigate the environment and 91% of traders feel they
will reach their financial goals. Still, more than four in 10
traders (42%) are taking on less risk in the current
environment.
Traders expect some relief in January with 55% saying it’s at
least somewhat likely we will see a “January effect” in which
markets are driven up fueled by optimism for the year ahead. For
the optimism to continue, traders would most like to see a decrease
in inflation metrics (64%), improved geopolitical stability (53%),
a change in Fed policy (51%), and strong corporate earnings
(38%).
The Charles Schwab Trader Sentiment Survey is a quarterly study
that explores the outlooks, expectations, and perspectives of
traders at Charles Schwab and TD Ameritrade. It found:
Likelihood of a recession
Expected beginning of a
recession
Expected length of a recession
Approach to risk
Highly likely
43%
It began in 1H 2022
28%
Less than 3 months
2%
A lot more risk
11%
Likely
27%
2H 2022
30%
3 – 6 months
12%
Slightly more risk
16%
Somewhat likely
19%
1H 2023
30%
6 – 12 months
41%
Same amount of risk
31%
Somewhat unlikely
4%
2H 2023
10%
1 – 3 years
39%
Slightly less risk
24%
Unlikely
2%
2024+
1%
3+ years
6%
A lot less risk
18%
Highly unlikely
1%
Don’t know
4%
“It’s environments like the one we’re now in that prove the
value of the trading tools, resources and education we provide,”
said Barry Metzger, Head of Trading and Education at Charles
Schwab. “This is undoubtedly a tough time, but traders remain
confident, engaged and resilient, and we continue to see strong
trading volumes and buying across both equities and fixed income
categories.”
Top concerns
The Federal Reserve’s continuing increase of interest rates is
now the leading concern among traders, with 17% saying it’s their
primary concern, while only 5% listed it as their primary concern
last quarter. Inflation, geopolitical or global macroeconomic
issues, and the political landscape in Washington D.C. follow as
top primary concerns. With most seeing a recession as inevitable,
it remains a primary concern for 13% of traders.
Most traders predict that the Fed will increase interest rates
by at least .50 percentage points in December and don’t see rates
dropping in the new year but are hopeful inflation will begin
easing in 2023. Nearly half do not expect to take specific action
to hedge against inflation, but those who will plan to buy Real
Estate (25%), Gold (21%) and TIPS (16%).
Likelihood of rates dropping in
2023
Expected timing for inflation to
ease
Hedging against inflation with
Highly likely
4%
3Q 2022
10%
Real estate/REITS
25%
Likely
8%
4Q 2022
11%
Gold
21%
Somewhat likely
24%
1Q 2023
17%
TIPS
16%
Somewhat unlikely
20%
2Q 2023
18%
Agricultural commodities
10%
Unlikely
22%
3Q 2023
12%
International stocks
10%
Highly unlikely
18%
4Q 2023
9%
Crypto
9%
Don’t know
4%
2024
14%
Bank loans
4%
2025+
8%
None of the above
47%
Sectors, Asset Classes and Strategies
Traders are the most bullish on energy (71%) and health care
(52%) broadly, and many also believe these sectors can be bought at
a discount right now.
Bullish over the next three
months
Bullish and at a discount
Bearish over the next three
months
Energy
71%
Energy
37%
Real Estate
75%
Health Care
52%
Tech
33%
Consumer Discretionary
62%
Utilities
47%
Healthcare
25%
Tech
51%
Consumer Staples
43%
Finance
23%
Finance
47%
At the asset class level, traders are bullish on value stocks
(48%), fixed income (37%) and domestic stocks (30%), with a
considerable increase in enthusiasm for fixed income as 37% of
traders are bullish on the category in Q4, compared to 26% in
Q3.
Looking at trading activity, a few strategies emerge as the most
popular among traders right now. They are trading more or the same
of equities (63%), individual equity options (53%), and ETF options
(47%).
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 813 Active Trader clients at
Charles Schwab and TD Ameritrade between the ages of 18-75 and was
fielded from October 5-17, 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.
(1122-2H4R)
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Margaret Farrell Charles Schwab (203) 434-2240
Margaret.farrell@schwab.com
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