Analysis: Retail trading appetite robust even as stock-buying frenzy cools
A 3D printed Robinhood logo and one dollar bills can be seen in front of the displayed GameStop logo in this illustration dated February 8, 2021. REUTERS / Dado Ruvic
Retailers have moved from "meme stocks" to large-cap names and exchange-traded funds, and while their activity has slowed from their January high, the rapid pace of new retail accounts opening means laypeople are likely to remain a market power.
Retail levels skyrocketed earlier in the year, aided by frenzied purchases of stocks like GameStop Corp (GME.N). However, according to the data, a pullback followed, although investors were expected to use stimulus checks to trade.
"We expected this huge inflow of retail cash to come in after the stimulus checks in March. That didn't happen," said Eric Liu, co-founder of Vanda Research, which monitors retail operations.
Liu said retail investors selling favorites like GameStop in February or March likely got burned as most of the names retailing stacked into in January fell between 20% and 30%.
This could have resulted in some investors withholding some money from the markets and driving others towards ETFs, he said. Buying ETFs via individual stocks is a more conservative trade because it spreads the risk.
JPMorgan analysts said in a statement on Wednesday that retail activity in small-cap stocks is near year-to-date lows but has been in recent weeks for large-cap stocks like Apple (AAPL.O) and Boeing (BA.N) and ETFs such as Invesco QQQ (QQQ.O).
While retail volumes have declined overall, they remain well for almost any other period of time, and other measures of retail exposure, like margin accounting, are also robust, according to Jefferies analysts in a note.
Activity at Charles Schwab Corp (SCHW.N) rose slightly in the week of April 12, to an average of just over 6 million daily trades, after falling from around 9.4 million for six weeks in the week of February 22 , show company metrics.
"When we moved into March and now well into April, customer engagement was moderate to a certain extent," said Schwab CEO Walt Bettinger on Thursday. "It's still elevated, but it appears at levels that could be more sustainable in the long run."
STILL USE THE APP
However, the underlying strength of opening online brokerage accounts means that analysts don't count retail investors just yet. Individuals have flocked to the market since October 2019 when big brokers like Schwab and Fidelity dropped their trading commissions after startups like Robinhood and Social Finance Inc (SoFi).
Mike Bijesse, a 34-year-old New Yorker with a fintech background, said he started using his Robinhood app on a daily basis at the start of the pandemic.
"I'm definitely a little bit addicted. There's such a thing as 'take a look at it first thing in the morning' and some impulse transactions," he said.
The influx of new investors soared during the COVID-19 lockdowns and their rapid trading in small-cap stocks like GameStop and AMC Entertainment (AMC.N) helped bring market volume to record levels, reaching one on Jan. 27 High of 24.48 billion shares according to refinitive data and analysts. Continue reading
Bijesse said that that day he sold AMC shares that he bought in December for a 5x return. More recently, after making its market debut last week, it bought a quarter of the mega-cap coinbase (COIN.O).
At Schwab, customers opened 3.2 million new accounts in the first quarter - more than in all of 2020, excluding the accounts acquired through mergers and acquisitions.
At Brokerage TradeZero America, new accounts are up between 300% and 400% this year from all of last year, said co-founder Dan Pipitone.
"While volumes have definitely gone down, the pace at which people are adding and opening accounts, we really haven't seen a deep drop," he said.
Since retail investor trading costs have come down so much, almost anyone can have a brokerage account, if only for entertainment purposes, said Ivo Welch, a finance professor at UCLA's Anderson Graduate School of Management.
"There are few other cheap thrills and games of chance where the odds are this good. Certainly much better than lotteries or Las Vegas," he said.
Our standards: The Thomson Reuters Trust Principles.
Source link
Comments
Post a Comment