Few see changes in allocation, as one-in-three have increased cash positions
December 18, 3012 – SAN FRANCISCO–(BUSINESS WIRE)–According to data captured in Charles Schwab’s most recent Trading Services Sentiment Survey, only 10 percent of traders say they have a bearish outlook for the next three to six months – the lowest level seen since the survey’s inception in February 2008, and a notable drop from September 2013 when 15 percent of traders surveyed had a negative short-term outlook.
While the vast majority of traders (90 percent) have a bullish or neutral near-term market outlook, only 23 percent of traders surveyed say they have changed their portfolio allocation to include less cash in the past three months – while one in three indicate they have increased their cash allocation. And, just 10 percent of respondents report being very confident that their portfolios are properly hedged against risk.
“While general outlook is more positive than we’ve seen in the past, we haven’t seen bullish sentiment translate into changes in trading behavior yet,” said Kelli Keough, Senior Vice President of Trading Services at Charles Schwab. “The survey results reflect what we’re hearing from our Trading Services clients – some say they feel the markets are overvalued, so they’re sitting on cash awaiting a pullback.”
Sector Outlook
Two in five traders (37 percent) indicate they are most bullish on the technology sector heading into 2014 while nearly 20 percent express the most confidence in the healthcare sector. Conversely, nearly a quarter of those surveyed (24 percent) say they are most bearish on utilities. The following is a breakout of the top three sectors on which traders indicate they are most bullish and bearish:
New Year’s Trading Resolutions
When asked about their commitment to a trading plan over the last year, more than half of traders surveyed (63 percent) report sticking closely to their plan or deviating slightly from time to time, while just five percent report feeling overwhelmed and deviating from their trading plan. Three in ten respondents (32 percent) report that they did not develop a trading plan at all and instead reacted to market conditions to make trading decisions.
“Developing a trading plan, and sticking to it, can help traders lower their anxiety and keep their trading on track in the New Year and beyond,” said Randy Frederick, Managing Director of Active Trading and Derivatives, Schwab Center for Financial Research. “Diversification and a proper asset allocation plan, setting realistic profit goals and determining proper loss thresholds are all critical factors for traders looking to devise an individual plan, and keeping things simple is often the most effective course of action.”
Looking ahead to 2014, 46 percent of traders indicate they intend to devote more time to trading education as part of their New Year’s trading resolutions, while 43 percent intend to identify new trading opportunities. Additionally, about one quarter (28 percent) of participants said they plan to develop and follow a trading plan.
“The focus on building knowledge in the New Year is particularly noteworthy as it is a trend that we are already seeing from our clients with record attendance levels at our live and virtual education events around the country,” added Keough. “Traders remain focused on the importance of assessing what’s worked and what hasn’t. They are taking advantage of the education that is available, and consulting the experts if a course correction is necessary – all hallmarks of an informed and sophisticated trader.”
Data from the Charles Schwab Trading Services Sentiment Survey were derived from 781 responses of participants in Charles Schwab’s Trader Education event that took place on December 3, 2013. More than 550 traders attended the event in person and more than 1,400 people participated in the live online component of the event.
Schwab provides traders with superior trading platforms, free seminars and workshops, online education resources and 24-hour access to experienced trading specialists, with no minimum trade requirements. For more information, please visit www.schwab.com/trader
About Charles Schwab
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