Fewer Traders Have Bearish Outlook Heading Into 2014

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:
Most Bullish       Percentage           Most Bearish       Percentage
Technology       37%           Utilities       24%
Healthcare 18% Financials 13%
Energy       13%           Consumer Discretionary       11%

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.

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