Young traders remain optimistic about the potential for further gains in the US stock market and plan to continue allocating more funds.

Despite the current high stock market valuations, optimism among traders remains high, according to the latest quarterly survey of Vanguard clients. More and more investors are betting that the bull market still has room to run, and the bullish sentiment continues to strengthen.

The percentage of bullish traders is 51%, far exceeding the 34% of bearish traders, according to the survey results. In particular, the percentage of bullish traders among young traders aged under 40 has risen to 59%, up from 47% in the fourth quarter of last year.

Notably, even though two-thirds of traders believe the market is overvalued, they still believe the bull market has room to run. James Kostulias, head of trading services at Vanguard, said: "Traders generally believe there is a bubble in the market, but overall they are still optimistic about the future." He added: "Over half of traders plan to invest more in the stock market in the first quarter."

While investors' bullish sentiment is usually interpreted as a positive signal for the market, it can also be a contrarian indicator when the market is overly optimistic.

Over the past two years, the S&P 500 index has risen more than 50%, experiencing a strong bull market. However, the upward momentum of the stock market has weakened recently amid concerns about economic slowdown and market volatility brought by the rapid policy adjustments of the new government. As of now, the S&P 500 index has only risen 1.3% this year, while the Nasdaq Composite Index, which has a higher proportion of technology stocks, has even fallen into the negative territory in 2025.

From the industry perspective, traders are most optimistic about the energy, technology, financial and utility sectors. These sectors usually benefit from potential regulatory easing policies under the Trump administration, so the market is optimistic about their growth prospects.

In addition to the rising bullish sentiment, the survey also found that traders' concerns about a recession in the United States have significantly decreased. Only one-third of respondents believe the country may fall into a recession in the short term, compared with 54% who held the same view in the previous quarter.

At the same time, traders' concerns about inflation accelerating again are also low. The survey found that two-thirds of respondents believe price pressures will remain stable and will not rebound significantly.