Charles Schwab Traders Stay Bullish, but Anticipate Stagflation

Bulls kept outpacing bears in Charles Schwab’s Q4 2025 Trader Sentiment Survey, fielded from September 30 through October 10, at the beginning of the ongoing government shutdown. When surveying 1,070 active trader clients, Schwab found 57% of respondents were optimistic about the market matching last quarter’s record level, marking the highest level of bullishness since the survey’s inception in 2022.

Still, optimism was tempered by growing caution: 67% of responding traders said the market was overvalued—up from 57% last quarter—and 57% said stagflation is somewhat or very likely within the next 18 months.

“Traders are cautiously bullish—confident in their ability to navigate uncertainty while staying realistic about valuations and volatility as we move toward 2026,” James Kostulias, Charles Schwab’s head of trading services, said in a statement.

Inflation, Labor Concerns

Broader economic uncertainty clouded traders’ long-term outlooks. A majority—57%—said they expect inflation to hold steady or decline over the next six months, down from 72% last quarter, while 63% said they anticipate a weakening labor market in the near term. Only 34% said they view current U.S. tariff policies as beneficial for the economy in the long run.

The most-cited concerns for the year’s fourth quarter were the potential for market correction or increased volatility (21%) and Washington politics (19%).

The caution seen among active traders mirrored a broader sense of financial unease. In Schwab’s 2025 Workplace 401(k) Plan Participants Survey, conducted from April 30 through May 17, 57% of participants cited to achieving a comfortable retirement, while respondents’ average expected retirement age increased as their confidence declined.

Strategy Shifts

Traders remained most optimistic about information technology (61%), energy (58%) and utilities (52%), while bullish outlooks on health care climbed 10 percentage points from Q3, to 40%. At the asset-class level, enthusiasm for artificial intelligence, growth and mega-cap tech stocks remained strong, with 57% of surveyed traders feeling bullish on mega-cap tech, up from 50% in Q3.

Even though many viewed these as crowded trades, more than half (55%) said they still believe it was a good time to invest in equities.

Asked how the stock market and economy were impacting their trading, 42% of respondents reported moving assets into stocks. Nearly one-third (32%) used options to hedge, 27% invested in gold, and 23% invested in cryptocurrency (23%).

Asked about plans for the next three months, 52% said they intend to move money into individual stocks, 44% said they plan to add money to exchange-traded funds, and 43% said they intend to add to overall portfolios, compared with 23% who said they plan to shift into cash. Nearly half (45%) identified as risk-seeking, while 30% described themselves as risk-averse. According to respondents, the most significant factors influencing trading strategies are: the Federal Reserve’s policy decisions, followed by inflation data, corporate earnings and tech performance.

“Traders see the concentration in AI and mega-cap tech as both opportunity and risk,” Kostulias said in a statement. “They’re staying nimble, hedging when needed, trimming on rallies and adding on dips.”