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Investors Still Confident, but Bearishness Is Building: Schwab Survey

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What You Need to Know

  • Forty-four percent of investors say they're bearish on the U.S. stock market for Q1, up from 34% in the year-ago quarter.
  • The pandemic, lower investing costs and advancements in digital innovation are driving increased investor engagement, Schwab says.
  • Clients' top concerns include inflation, market correction, political uncertainty, COVID's economic effects and rising interest rates.

A new survey of retail clients from Charles Schwab has found mixed results.

Forty-four percent of investors said they are bearish on the U.S. stock market for the first quarter, up from 34% in the same period last year, while 39% are bullish, down from 48% the same time last year.

Still, 58% of Schwab retail clients said they feel better off financially than they did a year ago. 

“Clients remain cautious toward the stock market given factors like inflation and ongoing uncertainty due to the pandemic, but we continue to see strong client engagement overall,” Jonathan Craig, head of investor services at Charles Schwab, said in a statement. 

“Among retail investors, more than three million new households opened accounts at Schwab and we saw 5.5 million retail daily active trades in 2021 — both up from 2020,” he said. 

Craig said that while the pandemic is driving higher levels of engagement among individual investors, several longer-term drivers are also at play, including lower investing and trading costs, developments such as fractional shares that make investing more accessible, and advancements in digital innovation. 

Schwab fielded an online survey between Jan. 5 and Jan. 16 among clients with retail assets of at least $2,000. 

Confident, With Concerns

Surveyed investors younger than 40 expressed more confidence in the market than older ones, with 42% reporting they are bullish in the first quarter. But their bullish sentiment plummeted from 61% in last year’s second quarter.

The survey found that 51% of Schwab clients are bullish about the health care sector, 48% about the energy sector and 46% about information technology. They are more bearish about real estate and consumer discretionary, cited by 37% and 32%. 

When it comes to their portfolios, 44% of Schwab retail clients said they will add money to their investment portfolio in the first quarter, and 61% said they will adjust their portfolio allocation. 

Thirty-seven percent of Schwab clients favor individual stocks, 30% ETFs and 19% mutual funds, while 16% said they will invest in cryptocurrency in the first quarter. 

While half of Schwab retail clients surveyed think now is a good time to invest and 94% are confident they will reach their financial goals, they still have concerns around these issues: 

  • Inflation: 19%.
  • Market correction: 14%.
  • U.S. political landscape: 13%.
  • Economic effect of COVID-19 and emergence of more variants: 12%.
  • Federal Reserve potentially increasing interest rates:  8%.