Schwab Survey: Two-Thirds of Traders Feel the Market Is Overvalued but Sentiment for the Quarter Ahead Remains Bullish
Bullishness among Schwab trader clients under the age of 40 jumps from 47% in 4Q '24 to 59% in 1Q ‘25
According to Charles Schwab's latest quarterly trader client sentiment survey, two out of three traders believe the market is currently overvalued and cite mega cap tech and AI stocks among the most crowded trades. That said, the bulls continue to outnumber the bears among traders 51% to 34%. Those numbers are consistent with the sentiment found during the fourth quarter of last year when 53% of traders were bulls and 31% were bears. Notably, there's been a spike in bullishness among traders under the age of 40 from less than half in 4Q '24 to nearly six in ten now.
"It's clear that the majority of traders believe there's some froth in the market but on balance they also feel like there's still more room for the bulls to run," said James Kostulias, head of Trading Services at Charles Schwab. "Our latest trader client sentiment survey also shows a strong increase in bullishness among younger traders at Schwab, as well as continued engagement across all types of traders. More than half of traders plan to move additional money into stocks in Q1."
The survey found a significant drop in the number of traders who believe the U.S. will enter a recession in 2025 with only a third of traders saying it's somewhat likely compared to 54% who said the same in 4Q 2024. Additionally, two-thirds of traders believe inflation will hold steady this year. When asked where rates will go in 2025, the most common response among traders signaled cuts in the range of 50 or fewer basis points.
Sector and asset class views
Looking across sectors, traders are most bullish on Energy, IT, Finance, and Utilities. Notably, Finance saw a jump of 11 points quarter over quarter. Traders are bearish on Real Estate and Consumer Discretionary, and Health Care saw a drop of 17 points.
Bullish Sector Sentiment |
4Q ‘24 |
1Q ‘25 |
Energy |
59% |
57% |
Information Technology |
55% |
57% |
Finance |
37% |
48% |
Utilities |
49% |
44% |
Industrials |
37% |
40% |
Materials |
37% |
35% |
Consumer Staples |
36% |
34% |
Communications |
34% |
32% |
Health Care |
47% |
30% |
Consumer Discretionary |
24% |
24% |
Real Estate |
34% |
20% |
When asked about asset classes and types, traders report the most positive sentiment toward domestic stocks, value stocks, growth stocks, AI stocks, and equities in general. Bullishness on cryptocurrencies and Spot Crypto ETFs both saw 10-point jumps. Fewer traders are bullish on meme stocks and international stocks.
Bullish sentiment over next three months |
4Q ‘24 |
1Q ‘25 |
Domestic stocks |
55% |
57% |
Value stocks |
56% |
54% |
Growth stocks |
55% |
53% |
AI stocks |
56% |
52% |
Equities in general |
55% |
51% |
Mega Cap Tech stocks |
48% |
45% |
Cryptocurrencies |
28% |
38% |
Commodities |
44% |
36% |
Fixed income |
34% |
33% |
Spot Crypto ETFs |
20% |
30% |
International stocks |
26% |
16% |
Meme stocks |
9% |
11% |
"Traders are likely reacting to sectors they believe stand to benefit from the new administration in Washington," said Kostulias. "That extends to crypto too where the regulatory environment is shifting fast and expected to become more friendly for the sector."
The new administration
Traders believe the new administration will be the greatest single factor impacting the stock market in 2025. Its impact ranks well ahead of factors including Fed policy, geopolitical conflict, inflation, and corporate earnings, according to the survey.
Factors that will have the biggest impact on the stock market in 2025 |
|
New U.S. presidential administration |
68% |
Fed policy |
39% |
Geopolitical conflict |
36% |
Inflation increasing |
31% |
U.S. corporate earnings |
27% |
Recession and/or recession fears |
26% |
The proliferation of AI |
24% |
About the Charles Schwab Trader Sentiment Survey
The Charles Schwab Trader Sentiment Survey is a quarterly study exploring the outlooks, expectations, trading patterns and points of view of clients at Charles Schwab–who actively trade equities or trade options, futures, or forex. The study included 1,040 Active Trader clients at Charles Schwab and was fielded from January 8-17, 2025.
About Charles Schwab
At Charles Schwab, we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients' goals with passion and integrity.
More information is available at aboutschwab.com. Follow us on X, Facebook, YouTube, and LinkedIn.
Disclosures
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Historical data should not be used alone when making investment decisions. Please consult other sources of information and consider your individual financial position and goals before making an independent investment decision.
All investments involve risk including the possible loss of principal. Please consider all risks and objectives before investing.
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Margaret Farrell
Director, Corporate Communications
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