Schwab's Retail Clients see Short Recession, Starting This Year

Nine out of 10 stock traders with accounts at Charles Schwab (US:SCHW) believe a US recession is very likely, with 74% of pollees expecting it this year.

That anxiety was the primary concern of 18% of the vast firm’s stock clients, triple the six percent reading a year ago.

But it’s a fickle crew at Schwab, with 69% expecting a year or less of recession, and only 20%, just one in five, is pulling money from stocks.

“Many traders also plan to add money to their portfolios at the same rate as last quarter (40%), and most say they are taking the same or slightly less risk in Q3 (59%),” the report, a quarterly study of the outlook and expectations Charles Schwab and TD Ameritrade traders.

Traders are also notably bearish on meme stocks (63%) and cryptocurrencies (63%). Few traders plan to buy cryptocurrency, and for those who do, most are not first-time crypto investors.

That’s worth noting as the firm launched its Schwab Crypto Thematic ETF (US:STCE), which it said will track its new Crypto Thematic Index and is designed to deliver global exposure to companies that may benefit from crypto growth. The index does not directly track or invest in cryptocurrencies.

The Charles Schwab Trader Sentiment Survey is a quarterly study that explores the outlook and expectations of  Charles Schwab and TD Ameritrade clients.

Traders are more bearish this quarter than last, with 59% in that category versus 53% last quarter.

Younger traders are taking it harder. Only 28% of Schwab’s young investors are optimistic about stock performance, a quarter-to-quarter erosion of sentiment.

“This is the first time some young traders are riding out a more prolonged bear market, so it’s no surprise their optimism took a hit,” Barry Metzger, Head of Trading and Education at Charles Schwab, said. “The good news is that across generations, traders are confident in their ability to navigate challenging markets.”

The report showed retail investors at the San Francisco-based pioneer of selling stocks to the broad public showing a particular preference for health care, energy, and utilities while being bearish on financial stocks.

Interestingly, more than a quarter of traders said tech stocks (39%) and finance (27%) are good buys now on valuation grounds.

Further crunching the data, Schwab said, revealed that fully half of the value traders are bullish on value stocks, and about half are bearish on growth stocks (52%), international stocks (53%) and equities in general (52%).

“Inflation remains the top concern around money and investing for traders (21%), but most think it will ease by the end of 2023 (79%). Likewise, most traders think the Fed will slow the pace of interest rate increases as we move through the remainder of the year,” the report’s authors concluded.

In July, Schwab’s board approved a new $15 billion stock buyback, as its existing authorization had fallen to $1.8 billion. The company also hiked its dividend by 10%, or two cents, to 22 cents.

Finance Chief Peter Crawford said at the time that higher capital levels facilitated the buyback’s expansion.

This article originally appeared on Fintel

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