Bullish sentiment cools as younger investors grow wary, but dip-buying appetite holds firm

Bullish sentiment cools as younger investors grow wary, but dip-buying appetite holds firm
Research shows under 40s are more likely to be pulling back from the market despite overall market optimism.
FEB 26, 2026

Trader optimism toward the markets softened early this year, with younger investors driving a notable shift toward caution even as most active traders remain inclined to deploy capital during downturns, according to new research.

The first quarter 2026 Trader Sentiment Survey from Charles Schwab found that 52% of respondents described themselves as bullish on markets, down from 57% at the end of 2025. The retreat in confidence spanned multiple age groups but was most pronounced among traders under age 40, whose bullish outlook dropped to 45% from 54% in the prior quarter.

Mid-career traders showed relatively stable sentiment, while optimism also slipped among older and retired investors.

Despite the cooling outlook, overall sentiment remains constructive. Nearly seven in 10 respondents expressed confidence in their investment decision-making, underscoring a market mindset shaped less by fear than by heightened vigilance.

“Trader sentiment continues to lean positive overall, though a stronger sense of caution is emerging—particularly among younger traders—alongside ongoing concerns that valuations have run too far,” said James Kostulias, Head of Trading Services at Charles Schwab. “Despite some concerns bringing traders’ sentiment down, we also see continued confidence in their ability to navigate challenges and ultimately, they appear to remain optimistic that there are opportunities for traders in this market.”

Valuation worries and geopolitical risks weigh

Concerns about stretched valuations remain widespread, with 58% of traders viewing equities as overpriced. Political developments, geopolitical tensions and fears of a potential US market correction ranked among the top factors influencing sentiment.

Economic anxieties also surfaced in the survey. More than half of participants expect the labor market to weaken during the first half of 2026, while 52% anticipate inflation will remain elevated rather than ease. Half of respondents said stagflation is at least somewhat likely, though only 24% believe a recession is imminent this year.

Those macro concerns appear to be reshaping sector preferences.

Bullishness declined toward artificial intelligence, growth-oriented equities and domestic stocks compared with late 2025 levels. By contrast, commodities gained favor, reflecting a shift toward perceived hedges against uncertainty.

Dip buyers still dominate

Even as caution rises, traders are not retreating from risk altogether.

Eighty three percent said they would likely buy during a meaningful market pullback in the coming three months, signaling continued willingness to capitalize on volatility. Nearly half described themselves as risk-seeking investors, while roughly one-third identified as risk-averse.

Portfolio positioning also points to sustained equity exposure. Fifty-nine percent reported plans to increase allocations to stocks, while 38% intend to expand options trading activity and one-third expect to boost gold holdings.

Corporate earnings trends, inflation data, tariff policy and developments tied to artificial intelligence were cited as the leading catalysts shaping trading strategies. AI-related equities were also identified as the most crowded trade, with 45% of respondents flagging the sector.

Sector rotation emerges

At the industry level, sentiment cooled toward information technology, financials and communications companies. Meanwhile, traders grew more constructive on materials, industrials and consumer staples.

Energy stood out as a particularly bright spot, with bullish sentiment climbing compared with the previous quarter.

The findings are based on responses from 2,121 active Schwab clients who trade equities or derivatives such as options, futures or foreign exchange. The survey was conducted between Jan. 20 and Jan. 27.

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