To The Moon

Traders are more confident in the stock market than they have been in the past two years. A recent survey by Charles Schwab found that 56% of respondents are optimistic about the next three months, up 10% from Q2 2024.

Overall, the sentiment among traders is quite positive. 60% respondents said their financial situation is better than a year ago, and 59% believe now is a good time to invest.

James Kostulias, head of trading services at Charles Schwab, noted, “Despite increased market volatility since the third quarter survey, we’re seeing long-term optimism among traders.”

AI Stocks are the Top Pick

When it comes to stocks traders are most excited about, AI tops the list. According to the survey, traders are most optimistic about AI (62%), domestic stocks (59%), growth stocks (58%), and large-cap tech stocks (57%) over the next three months. Overall, 57% of traders are optimistic about the stock market.

In broader terms, traders are bullish on sectors like IT (61%), Energy (57%), and Healthcare (49%). In contrast, fewer traders are enthusiastic about Consumer discretionary (23%) and Real estate (21%).

What Are Traders Worried About?

While inflation was the top concern last quarter, it has dropped to third place as more Schwab clients expect interest rate cuts soon. 33% respondents anticipate a reduction of 50 basis points or more by the end of the year.

Recently, Federal Reserve Chair Jerome Powell hinted at a rate cut in the September FOMC meeting, though the extent remains uncertain.

Beyond economic worries, most traders are also concerned about the political climate surrounding the upcoming presidential election. Although 20% list the political landscape as their main worry, 94% believe the November election will have some impact on the market.

The second-largest concern is a market correction.

Some traders are preparing their portfolios ahead of the election—44% are reducing portfolio risk, and 25% are hedging with options.