Charles Schwab Survey: Traders' bullish sentiment reaches the most optimistic level in two years

According to a survey by Charles Schwab, retail traders are showing the highest level of optimism in two years, with 56% reporting a bullish outlook for the market in the next three months, higher than the 46% in the second quarter. Compared to the second quarter, inflation concerns have eased in the third quarter, while expectations for a Fed rate cut have increased, strengthening the bullish sentiment. About 33% of respondents expect the Fed to cut rates by 50 basis points or more for the remainder of the year, up from 25% in the previous quarter.

James Kostulias, Head of Trading Services at Charles Schwab, said: "Despite increased market volatility since the third quarter survey, we have seen some longer-term positive sentiment among traders."

In terms of sectors, traders are most bullish on the information technology (XLK.US) sector, followed by energy (XLE.US), healthcare (XLV.US), and utilities (XLU.US). The least favored sectors are real estate (XLRE.US) and consumer discretionary (XLY.US).

The Charles Schwab Trader Sentiment Survey shows that most traders continue to be bullish on stocks related to artificial intelligence, with sentiment towards these stocks increasing by 6 percentage points to 62%. They point out that the information technology sector will be the most impacted by the rise of artificial intelligence, followed by the healthcare sector.

When asked about asset classes and investment styles, traders expressed increasingly positive sentiment towards growth stocks, large-cap tech stocks, US domestic stocks, and the broader stock market. However, bullish sentiment towards spot Bitcoin ETFs and spot Ethereum ETFs has significantly decreased.

In addition, Seeking Alpha's confidence survey in August showed that most investors expect the S&P 500 index to close higher in 2024 than its current level