Frequent traders get bullish on market, Schwab study finds

The Charles Schwab Corp.'s October survey of active traders showed a marked increase in bullish sentiment from three months earlier, the discount brokerage firm said today.
JAN 07, 2010
The Charles Schwab Corp.'s October survey of active traders showed a marked increase in bullish sentiment from three months earlier, the discount brokerage firm said today. Half of the 292 active traders and investors who responded to the firm's Active Trader Sentiment Survey said they expected the stock market to rise over the next six months, up from 34% who gave that opinion in July. The incidence of bears in the October survey fell to 14% from 19% a quarter earlier, while the percentage of respondents who were neutral about the market fell to 35% from 47%. The active traders were less certain about the U.S. economy, although they trended toward more optimism. Eighteen percent of respondents said they expect to see clear signs of a recovery in less than six months, up from 7% who gave that response in July. More than half, 54%, however, expected a recovery to be apparent by the end of 2010. Consequently, as one might expect from active traders — and to the delight of firms like Schwab — 63% said they expected to increase their trading over the next half year. Many investors, however, remain wary about moving their cash positions wholesale into stocks or bonds. Forty-five percent said that more than 30% of their portfolios remained in cash or equivalents, up from 43% with such large cash positions in the July survey. Respondents continued to be biased toward home-based stocks, with half saying the U.S. market is the most attractive region — the same percent as in the earlier survey. More investors are eying investments in developed Asian countries, however, while fewer are interested in emerging markets than three months earlier, the survey found. By industry, 40% of respondents were moving into technology stocks as their favorite recovery play, followed by 20% who were moving back into financials, according to the survey. In the July survey, traders were more biased toward investing in financial stocks to profit from the recovery. “While traders are clearly feeling better about the market, we also find they have not forgotten some of the lessons learned from the recent downturn,” Kelli Keough, Schwab's vice president of investor services, said in a release. “Traders are taking a much more active role today than ever before when it comes to diversifying their portfolios and managing them against continued volatility and unnecessary risk.” According to Schwab, which last month introduced its first exchange-traded funds with a splash by waiving commission charges, 55% of active traders in the survey reported using ETFs in what the firm termed a bid to diversify their holdings. That's up from 43% who said they were using ETFs in July. The survey data, which were analyzed by Directive Analytics, have a statistical accuracy at a 95% confidence level, according to Schwab.

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