Various market performance charts

Why 42% Of Schwab Investors Are On The Prowl For Stocks

Various market performance charts

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Investors know what they like, and they liked the November election results and December's interest-rate increase by the Federal Reserve.

Those events prompted a jump in investors who have retail accounts with Charles Schwab ( SCHW ) to declare themselves bullish. In a fourth-quarter survey of those investors, Schwab found 42% of them said they now feel bullish. That was a big jump up from the 34% who felt that way in Q4 a year earlier.

"As a result of the election, clients saw an increased prospect for a reduction in personal and corporate tax rates, an increased likelihood of spending on infrastructure, and an increased likelihood of a reduction in regulatory burdens for some industries," said Myhanh Hoskin, a Schwab financial consultant, who is based in Seal Beach, Calif. "The rate increase was a sign of growing strength in the economy."

Amid that widespread perception that the stock market had become increasingly worth investing in, Schwab investors did as much buying as selling in the quarter.

The top five U.S. holdings among all Schwab stock mutual funds were Apple ( AAPL ), Microsoft ( MSFT ), Exxon Mobil ( XOM ), Johnson & Johnson ( JNJ ) and JPMorgan Chase (JPM) as of Feb. 16, according to Morningstar Inc.

Apple is up 17% year to date, while Microsoft is up 4%, Exxon is down 10%, Johnson & Johnson is up 3%, and JPMorgan is up 5%.

In Schwab's survey of its clients, the general balance between buying and selling bodes well for the market in additional ways. "It shows there isn't a sense of euphoria," Hoskin said. "It shows caution by many investors. And that suggests that we're not seeing a market top. That is a good thing. When you have too many people doing the same thing, that tends to be a contrarian indicator."

On the other hand, only 13% of investors said their top concern about the market is that it appears overdue for a correction, suggesting a tone of overconfidence.

In contrast, a whopping 88% said they are confident about reaching their financial goals.

Allocations And Outlook

Investors had 41.3% of their money in stocks, 21.1% in cash, 18.8% in mutual funds, 11.9% in exchange traded funds, and 6.9% in fixed income.

And 21% of those investors said they planned to move more money into stocks during the current first quarter.

Stocks were the most popular planned destination for additional allocations.

ETFs were the second most popular target asset, with 17% of investors saying that's where they planned to put more money.

Mutual funds were the third most popular, with 15% of investors saying they would move money into them in Q1.

Investors were more inclined to get help in making investment decisions. The number of clients seeking planning advice rose 10% from a year earlier.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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