Despite uncertainty over rising interest rates and concerns about volatility, a new Charles Schwab survey finds that investors see the current environment as a good one for U.S. investment.
According to a survey of more than 1,000 investors at large and 300 active traders, conducted in the first five days following the September Federal Open Market Committee meeting, Schwab found that 58% of investors and 82% of active traders think that now is a good time to invest in the U.S. equities market.
Investors in the general population are a little more bearish and less optimistic than their active-trading counterparts, with 55% calling themselves bearish about the U.S. stock market in the next three to six months and 51% bearish about the fixed income market in the short-term too.
Meanwhile, the survey found greater optimism about the U.S. stock market and investing landscape among the 300 active traders, with 54% bullish about both the U.S. stock market and fixed income market over the next three to six months.
The survey identified general investors’ top investing concerns: 27% cited the overall strength of the U.S. economy, and 19% cited uncertainty due to increased market volatility. According to the survey, 58% of investors call market volatility their “foe.”
“It’s important for investors to keep their emotions in check through short-term market events and stay focused on their plan and goals,” said Kelli Keough, senior vice president of Trading Services at Charles Schwab, in a statement. “People who are engaged and informed about their investment strategy and have a plan in place are typically more likely to ride out volatility like we’ve seen since August.”
Since the extreme market volatility in late August, 27% of the investors surveyed say they have increased the level of cash in their portfolio, and 35% say they now have a lower tolerance for risk.
There is still a significant percentage of investors staying the course. According to the survey, 57% say they have made no changes to the amount of cash in their portfolio, and 43% say their tolerance for risk has not changed.
“Periods of market volatility do give investors the chance to revisit their emotional and financial tolerance for risk, and a significant move up or down in the market can be an opportunity to think about portfolio rebalancing – two important things for investors to consider relative to their broader plan and goals,” Keough said in a statement.
While the broader population of investors sees market volatility as a cause for some concern, 60% of traders surveyed see volatility as their “friend.”
Since volatility spiked in August, 55% of traders say they have increased their cash allocations. Schwab suggests this could mean that these traders are looking to take advantage of buying opportunities amidst the market’s ups and downs.
”While some traders are approaching recent market uncertainty with caution and a quarter have concerns over the strength of the U.S. economy, the majority believe opportunities can be found in market swings and have an optimistic outlook in the near term,” Keough said in a statement. Of the traders surveyed, 42% say they plan to trade more between now and the end of the year compared with their level of trading during the first three quarters of 2015. This is nearly double the percentage who expect to trade less (22%).
Uncertainty Over Interest Rates
Both investors and traders view a rate hike from the Federal Reserve as a potential threat to the U.S. stock market, although many are still uncertain about its possible impact.
According to Schwab, 44% of the investors surveyed think the prospect of a Fed rate increase poses a threat to the current bull market, while 23% do not believe an increase poses a threat, and one-third say they aren’t sure how rising rates could influence the stock market.
Meanwhile, 58% of the active traders surveyed think the Fed moving to raise interest rates poses a threat to the U.S. bull market, compared with 28% who say it does not.
When asked about how rising rates will impact their own financial well-being, investors are divided – 38% think it will have a negative impact, 35% believe it will have a positive impact, and 27% say it won’t make any difference.
Active traders are more positive than general investors about how an increase in rates will impact their financial well-being, with 49% saying they believe rising rates will have a positive impact.
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