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CEO Walt Bettinger of Schwab

Portfolio > Economy & Markets

Inflation Is Weighing on Investors' Market Outlook: Schwab

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Inflation has given individual investors a slightly bearish market view, according to a Charles Schwab & Co. client survey.

“What’s happened is that inflation has now become the No. 1 concern among investors across … 35 million clients that we serve,” Schwab CEO Walter Bettinger said Thursday in a CNBC interview with Jim Cramer, citing the brokerage’s most recent client sentiment report.

“When they think about inflation, it has moved their position from the first quarter of being a little bit on the bullish side to where now they’re a little bit on the bearish side,” he added.

Investors’ big concerns with inflation underscore why a diversified portfolio is so important, according to Bettinger.

“If you have a mix of fixed income or cash and stocks and other investments and you get a bit more inflation, you do have opportunity to build income on that side of your portfolio — the cash and the bond side,” he said.

Sentiment among Schwab’s actively trading retail clients has dipped in the second quarter but remains higher than in 2022 and 2023, according to the survey, released Thursday.

Of the 920 clients polled last month, 46% reported a bullish outlook on the U.S. stock market, down from 53% in the first quarter. Bearish sentiment varied by age but increased significantly among young and midlife investors, jumping more than 15% for each group, from the first quarter, Schwab said.

Inflation concerns more than doubled from the first to second quarter this year, rising to 19% from 9% of clients citing it as a primary concern, hitting the top spot. Inflation was followed by the political landscape, a market correction and geopolitical or global macroeconomic issues as top concerns.

“Traders began the year feeling pretty confident that the economy was improving and Fed rate cuts would be quick to follow,” James Kostulias, Schwab’s trading services head, said in a statement.

“But inflation concerns have jumped significantly,” he said. “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.”

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