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Market Extra: Charles Schwab survey sees ‘astounding’ influx of new traders, finds tech top pick in reopening

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A surge of new traders entered the market during the pandemic, with many feeling bullish about U.S. stocks in the second half of 2021, a new Charles Schwab survey found. 

“We’ve seen such an influx of new traders in the last year and a half,” Barry Metzger, head of trading and education at Charles Schwab, said Thursday during a call with media on the firm’s latest active trader pulse survey. “It’s really astounding.”

Schwab’s biannual survey, which probed 500 U.S. traders who make at least 36 equity trades a year, found that information technology was the most popular pick when asked which three sectors will see the best performance as the economy reopens. Forty percent of traders pointed to tech
XLK,
+0.98%
,
with healthcare coming in second at 31% and financials
XLF,
-0.74%

ranking third at 30%. 

Newcomers and veteran traders are spending more time researching before placing their bets, according to Metzger. About two-thirds of traders reported spending at least 5 hours a week researching trades, the survey shows, with online news stories and commentaries, research reports and broadcast news cited as their top sources for help in making decisions.

Meme stocks, meanwhile, remain popular with traders surveyed by Schwab.

“We did see nearly half of traders jump into the meme stock trend this year,” Metzger said. “We don’t see the meme stock frenzy going away anytime soon.”

See:Welcome to MemeMarkets, your guide to the world of ‘Stonks’

Thirty-one percent of surveyed traders said they include meme stocks in their trading plans, while 27% said they participate in them “for fun” and 42% reported investing in meme stocks both for fun and as part of their trading plans. 

As for their outlook for the U.S. stock market for the next three months, 35% of traders described themselves as “bullish” and 45% as “neutral,” the survey shows.

That’s not all too surprising given the strong performance of stocks this year, according to Randy Frederick, managing director of trading and derivatives at Charles Schwab. 

“One thing we often find consistently is that most people’s outlook is going to reflect the most recent past,” Frederick said during the media call. “If we’re in an uptrend, they tend to believe that uptrend will continue.”

The S&P 500 index
SPX,
+0.13%

has gained more than 17% this year, while the Dow Jones Industrial Average
DJIA,
-0.19%

has returned 14% and the tech-heavy Nasdaq Composite
COMP,
+0.11%

has risen almost 13%, according to FactSet data. 

Read: ‘Something will give’ in U.S. stock market amid ‘discomforting sentiment signals,’ Citi warns

Traders’ top two worries were the COVID-19 pandemic and inflation, the Schwab survey found. 

“We’ve been on watch, if you will, for so many things over the last year and a half,” said JJ Kinahan, chief market strategist at TD Ameritrade, during the media call. “It always amazes me that we continue to hit new highs.”

Check out: The S&P 500 hasn’t fallen by at least 5% in nearly 200 sessions — Here’s what history says happens next

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