Traders Embrace Bullish Sentiment Despite Market Overvaluation

Traders Embrace Bullish Sentiment Despite Market Overvaluation

In a recent survey conducted by Charles Schwab, optimism prevails among traders as bulls outweigh bears. The poll, which surveyed 1,040 active traders last month, revealed that 51% of respondents identify as bullish, compared to 34% as bearish. This sentiment comes in spite of the market's perceived overvaluation, with two-thirds of traders acknowledging that stocks are expensive.

A notable shift in traders' expectations about the U.S. economy has emerged, as fewer anticipate a looming recession. Only one-third of respondents now consider a recession "somewhat likely," a significant drop from 54% in the previous quarter. This change reflects growing confidence among investors, who are increasingly betting on the continuation of the bull market.

Despite concerns about market valuation, traders remain unfazed by price pressures. Two-thirds believe that inflation will hold steady and do not foresee a reacceleration. This sentiment aligns with the recent performance of key indices; although the S&P 500 has climbed over 50% in the past two years, its momentum has decelerated. Meanwhile, the equity benchmark has risen merely 1.3% this year, and the tech-heavy Nasdaq Composite has slipped into negative territory for 2025.

James Kostulias, head of trading services at Charles Schwab, noted the prevailing sentiment among traders.

"It's clear that the majority of traders believe there's some froth in the market but on balance they also feel like there's still more room for the bulls to run," said Kostulias.

Interestingly, younger traders under the age of 40 have shown a marked increase in optimism. Their bullish sentiment has surged to 59%, reflecting a burgeoning confidence in future market performance. This optimism is translating into action, with more than half of all traders planning to allocate additional funds into stocks during the first quarter.

"More than half of traders plan to move additional money into stocks in Q1," added Kostulias.

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Alex Lorel

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