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Delta Variant Is Top of Mind for Active Traders: Schwab

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What You Need to Know

  • Delta outranks inflation, Federal Reserve policy and U.S.-China relations as the top factor, a survey found.
  • One-third of traders have changed their strategy in response to delta, and half of those who have not said they may do so.
  • Many traders are doing more research before placing trades than they did before March 2020 — but not on social media.

The pandemic is the top factor influencing active traders’ strategies for the rest of this year, according to Charles Schwab’s biannual survey of traders who make 36 equity trades or more per year.

It ranks above inflation, Federal Reserve policy and U.S.-China relations in the survey results, released Friday.

One-third of active traders said they have already changed their strategy with the rise of the delta variant. Half of those who have not yet changed course said they may alter their tactics in coming months as the pandemic’s next phase evolves.

Traders said they are employing a mix of strategies to shore up their portfolios against the delta variant. Forty-four percent of those who already made changes have increased overall equity exposure, 37% have increased their exposure to cash and 34% have increased their overall fixed income exposure.

Thirty-six percent of traders who have yet to change their strategies because of delta have increased cash exposure, 30% have decreased overall equity exposure and 27% have invested in more domestic stocks.

Logica Research conducted the survey from July 28 to Aug. 4 among 500 active traders 18 to 75 who live in the U.S. and made 36 or more equity trades per year. 

Deeper Research, but Not on Social Media

Nearly all traders in the survey said they intend to trade in the same way as they have been in the coming months, or more so. They are investing both their time and their money. 

Forty-five percent of active traders reported that they are conducting more research before placing trades than they did before March 2020, when pandemic-related market volatility shook the market. On average, they spend seven hours researching and more than five hours pursuing trading education each week. 

Fifty-eight percent said they look to online news articles and commentary, 50% dip into research reports available through their trading firm or elsewhere, 41% listen to business broadcast news outlets and 38% avail themselves of brokerage firm educational tools and resources. 

Despite this year’s social media-fueled trading frenzy, only 23% of respondents said they relied on social media for trading education and ideas. 

“The last 18 months has unleashed an influx of new traders into the market, and as we examine this data, we are seeing traders new and seasoned alike are attuned to the pressing issues of inflation and the Delta variant,” Barry Metzger, head of trading and education at Charles Schwab, said in a statement. 

“We’re finding strong engagement among all traders and a deep commitment to doing the legwork necessary to actively manage a portfolio. Most traders also see the retail trading boom that began in 2020 with the start of the pandemic continuing for some time, though perhaps at a more moderate pace.” 

Traders have also shown themselves to be increasingly nimble. Compared with before March 2020, more than a third said they are trading more on mobile devices than they did before March 2020, and nearly half of traders are altering their plans at least monthly to adjust to the changing environment. 

Sectors to Watch in Second Half

Besides their concerns about the delta variant, 95% of active traders reported being concerned about the threat of inflation, and 86% believe we are in a stock market bubble. 

Still, more than one-third of survey participants reported feeling bullish on equities in the second half of the year. 

Overall, the survey also found overlap between the sectors that traders expect to be most affected by volatility and those they think will deliver the best market performance. 

Sectors where traders expect the most volatility:

  • Financials
  • Health care
  • Real estate
  • Information technology
  • Consumer discretionary

Sectors where traders expect the best performance upon reopening:

  • Information technology 
  • Health care
  • Financials
  • Energy
  • Real estate

A closer look at asset classes and investing trends shows that 65% of active traders are also bullish on both domestic stocks and growth stocks, and 67% are bullish on value stocks. 

Despite market outperformance, 57% of traders are bearish on international stocks, and 54% feel cautious about both fixed income and cryptocurrencies and 61% about meme stocks.