Traders Remain Cautiously Bullish, with Concerns About the Political Landscape, a Potential Market Correction, and Stagflation
Two-thirds of traders feel the market is currently overvalued, up from 57% last quarter.
Nonetheless, nearly six in 10 traders say they're still bullish and 70% are confident in their decision making.
Charles Schwab, a leader in investing and trading with $11.59 trillion in total client assets and more than 7 million daily average trades, today announced the findings of its Q4 2025 Trader Sentiment Survey, revealing that traders remain decidedly bullish even as concerns about politics, market overvaluation and stagflation persist.
According to the survey, 57% of traders describe themselves as bullish on the market, matching last quarter's number which was the highest level of optimism recorded since the survey was established in 2022.
Despite trader bullishness, they also acknowledge the potential for some headwinds - two-thirds (67%) of traders believe the market is currently overvalued, up from 57% who said the same last quarter. And more than half (57%) say stagflation -- the combination of slow growth and persistent inflation -- is somewhat or very likely in the next 18 months.
Traders cite the political landscape in Washington, D.C. (19%) as their top concern for the quarter, followed closely by fears of a market correction or increased volatility (a combined 21%).
Their market expectations are driving roughly a quarter of traders to invest in gold (27%) and crypto (23%) but more (42%) are moving assets into the stock market and/or engaging in options hedging (32%).
"Traders are currently in a cautiously bullish stance," said James Kostulias, Head of Trading Services at Charles Schwab. "They're confident in their ability to navigate uncertainty and see opportunities in the market, but they're also realistic about valuations and the potential for volatility as we move toward 2026."
Economic Crosscurrents
The survey finds that most traders (57%) expect inflation to hold steady or decline over the next six months. While that represents a majority, it's down from the 72% who said the same last quarter. Meanwhile, the number of traders who see stagflation as likely in the next 12 to 18 months jumped from 47% last quarter to 57% now.
Expectations for inflation over the next six months |
||
|
Q3 outlook |
Q4 outlook |
Inflation will decline |
17% |
8% |
Inflation will hold steady |
55% |
49% |
Inflation will reignite |
29% |
32% |
Likelihood of "Stagflation" over the next 12-18 months |
||
|
Q3 outlook |
Q4 outlook |
Very/somewhat likely |
47% |
57% |
Somewhat/very unlikely |
44% |
33% |
I don't know |
9% |
10% |
The survey also finds that most traders (63%) expect the labor market to weaken over the next two quarters, and only one-third (34%) view current U.S. tariff policies as positive for the economy in the long run.
"The current economic picture has been difficult to read due to a swirl of factors, and that uncertainty is reflected in these findings," said Kostulias. "Traders are clearly watching the dynamics closely, and we've seen tremendous engagement in our education resources – nearly 1,000 clients came out to our recent Market Drive event in Dallas, for example, and we've had more than 35 million views of our education content year-to-date. From our extensive library of articles, podcasts, videos, courses and 35 hours a week of interactive expert webinars from Schwab Coaching®, we continue to invest heavily in the education pillar of the Schwab trading experience to help our clients ‘meet the moment' and progress towards their goals."
Sector and Asset Class Views
At the sector level, traders are the most bullish on IT (61%), Energy (58%), and Utilities (52%). While sector sentiment was largely unchanged quarter-over-quarter, healthcare saw a 10 percentage-point jump in bullishness.
Bullish sentiment over next three months |
Q4 ‘25 |
Q3 ‘25 |
Information technology |
61% |
63% |
Energy |
58% |
56% |
Utilities |
52% |
49% |
Finance |
48% |
51% |
Materials |
43% |
43% |
Industrials |
40% |
43% |
Healthcare |
40% |
30% |
Communications |
38% |
41% |
Consumer staples |
32% |
35% |
Real estate |
23% |
20% |
Consumer discretionary |
18% |
23% |
At the asset-class level traders remain most bullish on AI stocks, growth stocks, mega-cap tech, domestic equities and equities overall. This mirrors Q3 trends, though enthusiasm for mega-cap tech grew the most – from 50% to 57% bullishness. At the same time, AI stocks continue to be seen as the most crowded trade, followed closely by Mega-Cap Tech stocks.
Overall, 55% of traders say now is a good time to invest in equities, and 45% describe themselves as risk-seeking, compared with 30% who identify as risk-averse. More than half (52%) plan to move money into individual stocks in the next three months, and 44% intend to move money into ETFs.
Top plans (over the next three months) |
|
Move money into individual stocks |
52% |
Move money into ETFs |
44% |
Add money into my investment portfolio |
43% |
Move money into cash investments |
23% |
When it comes to policy, traders rank Federal Reserve actions as the most significant factor impacting their trading strategies, followed by inflation data, corporate earnings, and performance in the tech sector.
"Traders see the concentration in AI and mega-cap tech for what it is – both a source of opportunity and potential risk," said Kostulias. "Even with concerns about overvaluation, traders believe these stocks still have room to run going into next year, although they may simply be staying nimble by utilizing options to potentially hedge against some risk, looking at opportunities to trim some positions when they see steep rises, or adding to their positions when down days hit."
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 1,070 Active Trader clients at Charles Schwab and was fielded from September 30 – October 10, 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
This material is intended for informational purposes only. The investment strategies mentioned may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decisions.
Investing involves risk, including loss of principal, and for some products and strategies, loss of more than your initial investment.
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Margaret Farrell
Director, Corporate Communications
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