ilkercelik
Fewer retail traders had a bullish outlook on the U.S. stock market (SP500) in Q2, as they significantly tempered expectations for interest-rate cuts by the Federal Reserve, according to the Charles Schwab (NYSE:SCHW) Trader Sentiment Survey released on Thursday.
With inflation remaining sticky, some 20% of traders surveyed by Schwab (SCHW) now expect 51-100 basis points in rate cuts this year, down from 47% in Q1. A further 32% believe the Fed will not cut rates this year, up from 10% last quarter. They are more confident that the Fed will implement two 25-basis-point cuts this year
Inflation concerns have more than doubled sequentially to 19% from 9%. The political landscape came in as the second-biggest concern, followed by worries that the market is due for a significant correction.
"While about half of traders believe we’ll avoid a recession this year, overall stock market sentiment cooled a bit in Q2 as those concerns took hold and expectations for rate cuts were significantly dialed back as key drivers like the Consumer Price Index indicated inflation was once again on the rise in March," said James Kostulias, head of Trading Services at Charles Schwab.
By sector, the bulk of traders (64%) are bullish on energy over the next three months, followed by information technology (51%), materials (40%) and health care (40%). Conversely, traders are most bearish on real estate (52%), followed by consumer discretionary (43%), and finance (34%).
For their asset-class outlook, traders remain bullish on AI stocks, though 44% believe AI is the most crowded trade. Sentiment toward mega cap tech and equities in general came in roughly flat Q/Q, while bullishness toward both value stocks and growth stocks edged down.
Nevertheless, more traders said they plan to add money to their investment portfolio over the next three months (48% vs. 38% in Q1).
In May, consumer sentiment fell markedly in the wake of a hotter inflation outlook.