Active Traders Wary of Second Half of the Year

By Hal M. Bundrick

NEW YORK ( MainStreet)--Market volatility may be taming active traders, who admit they are growing a bit cautious in their outlook for the remainder of the year. Nearly 38% of traders polled for the Active Trader Sentiment Survey by Charles Schwab say they are bullish on stocks over the next three to six months - but that's down significantly from 52% in March.

Based on survey responses, most active traders believe they have done only an average - or slightly better - job of managing the markets as 75% said they would rate their portfolio performance with a "B" or "C" grade. A meager 4% would give themselves a grade of "A" for year-to-date returns. While over half (54%) believe that equities remain attractive, 37% are unsure if now is a good time to invest.

"These results show active traders shifting to a more neutral outlook on the markets in mid-June, likely in anticipation of volatility ahead," says Kelli Keough of Charles Schwab. "In hindsight, we know their outlook was largely accurate as the Fed announced it would likely begin slowing the pace of its bond buying program shortly after this survey was conducted, resulting in a spike in market volatility. In addition, these results show a slight drop in confidence - 58% of active traders say they are somewhat or very confident that their portfolios are properly hedged against potential risk, compared to 66% who expressed the same level of confidence at the end of the first quarter."

The survey also revealed:
  • Sticking with stocks and ETFs -- For active traders planning to invest in equities, 77% say they plan to purchase individual stocks while 72% say they'll buy ETFs. One-quarter plan to trade options.
  • Go tech - One-quarter of traders said they are bullish on the technology sector, up from just 16% in April. Other in-favor sectors were healthcare (17%), energy (15%) and financials (13%).
  • Toss to the option -- 28% of survey respondents said they currently trade options while 11% say they plan to start trading options in the next 12 months.
  • Working vacation -- 39% of active traders expect to keep an eye on their portfolio during a summer vacation but won't trade much, while a nearly equal number (38%) said they would be trading during their summer break.

--Written by Hal M. Bundrick

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