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Retail investors are optimistic about the stock market again despite a backdrop of geopolitical and economic uncertainty.
About 53% of respondents to the latest Charles Schwab Trader Sentiment Survey reported a bullish outlook for US stocks, a jump from 32% during the fourth quarter of 2023. The January survey polled 762 Schwab and TD Ameritrade clients who are active traders.
The latest reading marks the highest level of bullishness seen since the survey launched in 2021.
“As the economy continues to show signs of improvement, trader optimism is on the rise,” said James Kostulias, head of trading services at Charles Schwab in a statement accompanying the report.
Investors have a lot to be happy about these days. The S&P 500 index closed at a record high and the Dow Jones Industrial Average index breached 39,000 for the first time on Thursday, continuing their streak of new milestones this year. That comes after artificial intelligence darling Nvidia reported on Wednesday evening that its profits grew an eye-popping 769% year-over-year during the fourth quarter of 2023.
CNN’s Fear & Greed Index, which measures seven barometers of market sentiment, closed at an “extreme greed” reading on Thursday.
Unsurprisingly, investors are largely bullish on artificial intelligence-related stocks over the next three months, according to the Schwab survey.
Tech bulls have been rewarded handsomely over the past year, as the Magnificent Seven tech stocks have soared to staggering heights (though some have faltered in recent months) and spurred a powerful bull market that overcame a regional banking crisis, recession expectations, the Federal Reserve’s interest rate hiking campaign and geopolitical turmoil.
Corporate earnings have continued to hold up, providing a boost to stocks. The blended quarterly growth rate of S&P 500 companies for the fourth quarter of 2023, which combines estimated and reported earnings results, is about 3.8%, according to FactSet data.
The job market has also stayed remarkably strong even as interest rates hover around a 23-year high, helping keep recession worries at bay. The US economy added 353,000 jobs last month while the unemployment rate remained at 3.7%, according to the Bureau of Labor Statistics.
About 48% of traders believe the US will likely avoid a recession this year, up from 23% last quarter, according to the Schwab survey.
Still, retail investors aren’t worry-free when it comes to possible uncertainties down the road. The Federal Reserve has indicated that it won’t cut interest rates anytime soon, stoking fears that rates will remain higher for longer than expected. Those concerns sparked a sell-off last week, leading all three major indexes to break a five-week streak of gains.
Investors are also worried about issues overseas — the threat of escalation in Middle East conflict, China’s struggles to jumpstart its economy and recessions in the United Kingdom and Japan.
Geopolitical and global economic issues are the biggest worry for traders, followed by the political landscape in Washington as the US presidential election draws closer, according to the Schwab survey.
Sales of existing homes in the US climbed in January, pushed up by buyers who were encouraged to make a purchase by falling mortgage rates. But the surge may be short-lived if rates extend a post-January climb, reports my colleague Anna Bahney.
Existing home sales (not newly-constructed homes) — which include single-family homes, townhomes, condominiums and co-ops — beat expectations, rising 3.1% in January from the prior month to a seasonally adjusted annualized rate of 4 million units, according to a report from the National Association of Realtors.
Compared to a year ago, when sales were at a 4.07 million pace, sales were down 1.7%.
“While home sales remain sizably lower than a couple of years ago, January’s monthly gain is the start of more supply and demand,” said Lawrence Yun, chief economist at NAR in a release. “Listings were modestly higher, and home buyers are taking advantage of lower mortgage rates compared to late last year.”
With a return of eager buyers to the market, the cost of homes also went up. The median cost for a home jumped 5.1% from a year ago to $379,100, the seventh straight month of annualized price gains. January is usually a sleepier month for home sales, but prices reached a record high for the month.
Read more here.
In 1867, pharmacist Henri Nestlé combined dried cow’s milk with cereals and sugar to create a safe, easily digestible breast-milk substitute. That infant formula was the foundation of what would become the world’s biggest food company.
Now, Nestlé is embracing a new “significant demographic opportunity”: the planet’s aging population.
The Swiss company’s pivot from babies to baby boomers is part of a bigger push into healthier products, as it looks to capitalize on the return of dieting that is reflected in the insatiable appetite for weight-loss drugs Wegovy and Ozempic, reports my colleague Hanna Ziady.
“Losing weight and being on a diet has become cool again,” CEO Mark Schneider told journalists Thursday. “You can expect a continued new stream of products to address that need.”
Read more here.
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