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Schwab Q2 Trader Sentiment Survey: More Than Half of Traders Say the Market is Due for a Significant Correction in the Second Quarter

05/11/2022

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
Q2 concerns

 

Expectations for
when inflation will
begin to ease

 

Hedging against inflation
with…

 

Hedging against
geopolitical risk by…

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%

 

 

 

 

 

 

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
leads to acceleration in green energy
sector in 2022

 

Impact on trading strategy if oil prices continue to
rise

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.

Margaret Farrell
Charles Schwab
(203) 434-2240
Margaret.farrell@schwab.com

Source: The Charles Schwab Corporation

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