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After the performance ceased in 2021, individual investors withdrew from the market

Individual investors kicked off 2021 with the pace of sprinters. Now they finally showed signs of fatigue.

After a sensation this year, the trading activity of non-professional investors has slowed in recent weeks, and the group has invested less in all investments from US stocks to call options. The average daily transaction volume of at least two online brokers has dropped slightly from the 2021

high. Across the industry, the number of visits to brokerage sites and the time spent on these sites has decreased.

The decline in enthusiasm marked a sharp reversal a few months ago, when the frenetic activity of individual investors took center stage in financial markets. As the stock price of “meme stocks” soared in January, millions of small investors poured in, pushing the already strong retail investment trend into an over-driven state. In a frenzy that market observers have never seen before, individual investors have distributed shares such as GameStop Corp.. GME soared 0.86%, pushing the brokerage platform to the top of the app store rankings. The trading volume has soared to the point that many brokers struggle to keep the platform running smoothly.

Individual investors and analysts said that the factors driving the recent downturn are a series of factors, including concerns about the volatility of growth stocks. In growth stocks, small investors tend to invest heavily. Since February 12, the high-tech Nasdaq Composite Index has set a recent record, including Tesla (Tesla Inc.), Weilai (NIO Inc.) and Apple (Apple Inc.)

Stock code Safety Last change change%
GME Game stop 191.45 +1.63 + 0.86%
TSLA Tesla Limited 661.75 -6.18 -0.93%
Wei Lai NIO INC. 39.66 +0.68 + 1.74%
AAPL Apple Inc. 123.00 +0.85 + 0.70%

Viraj Patel, global macro strategist at Vanda Research, said: “Like any investor, you will not add new funds in a market where there is no clear catalyst to push stocks up by 5% to 10%.” In the past two weeks, retail investors have entered a dormant state.”

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At the same time, the broader S&P 500 index continued to rise and ended last week at record levels, rising by 7% by 2021. When the economy rebounds-but historically, this situation has been less popular among individual investors.

Vanda Research’s traffic tracker VandaTrack estimates that since mid-February, the average performance of non-professional investors has lagged the S&P 500 by about 10%, and the company believes this lag has played a role in the retreat. To make up for the losses, VandaTrack data shows that in March individual investors turned to more economically sensitive companies, including Boeing, Starbucks and JPMorgan Chase.

Stock code Safety Last change change%
BA Boeing 252.96 -1.76 -0.69%
SBUX Starbucks 109.38 +0.11 + 0.10%
JPMorgan JP Morgan Chase Co., Ltd. 153.71 +1.48 + 0.97%

Although few analysts expect the trade frenzy in late January to continue forever, many expect individual investor interest to continue to increase throughout the spring, especially after President Biden signed the latest stimulus package, which includes The stimulus package, which the Americans directly pay $1,400, came into effect in March. . Many people expect that after the first two stimulus checks, these checks will stimulate the buying frenzy and exceed the previous rise.

In this photo provided by the New York Stock Exchange, trader Neil Catania (Neil Catania) works on the floor on Thursday, March 25, 2021. As the decline of technology companies is being offset by the yield of bond yields in banks, stocks fluctuate in volatility on Thursday afternoon.

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Instead, the stimulus wave passed in the future, and purchases declined. According to data from VandaTrack, recently, the daily net purchases of US stocks and exchange-traded funds by individual investors have reached the lowest level this year.

On March 26, individual investors bought approximately US$772 million in US stocks, a 60% drop from the nearly US$2 billion reached in one day on January 29, which coincided with the meme stock boom. The two most recent declines in the number of stock purchases by individual investors are on Christmas Eve and the Friday after Thanksgiving in 2020. Historically, stock market trading volumes have tended to be low in these two days.

Analysts said they are paying close attention to other indicators, including brokerage firms’ trading activities and website visits. Charles Schwab and Interactive Brokers Group Inc. recently reported that average daily trading volume in March was down from the 2021 high.

Stock code Safety Last change change%
Schwein Charles Schwab 66.44 +1.26 + 1.93%

At the same time, SameWeb, an analytics company that tracks desktop and mobile traffic to agent websites, found that company traffic across the industry dropped sharply in March compared with February. For example, according to SimilarWeb, Robinhood Markets Inc.’s traffic has dropped by 35%, and the company’s data cannot capture application traffic.

Charles Hornat, 50, an information security expert and adjunct professor at New York University, is one of such investors. Since many of his growth stocks have fallen behind, he has been on the sidelines recently. He estimates that his portfolio has fallen by about 50% since the beginning of February, mainly because of his positions in companies such as Tesla, Snap Inc., and dedicated acquisition company Churchill Capital Corp. IV.

Stock code Safety Last change change%
Break off SNAP, INC. 54.49 +2.20 + 4.21%

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He said that Mr. Hornert started trading in the fall of 2019, and for some time, the stocks seemed to be only rising.

He said: “I thought,’It’s easy, it’s incredible, and then Covid-19 hits and everything goes backwards.” “I knew it from beginning to end. [trading through a drawdown] That’s something I don’t have experience with… So in the past few weeks, I took a break and said, “I have an unrealized loss, and I’m satisfied with it. I’m going to sit down and ride it.’”

Mr. Hornert recently stated that he has executed some small-volume transactions for Tesla to capture the stock’s movements. He said otherwise, he believes in the company he owns and plans to neither sell nor sell.

He said: “Because there are too many unknowns, I don’t believe in doubling.” However, he joked: “I think this is something you learn how to diversify your portfolio or something.”

Analysts are also monitoring activity in the options market, which recently indicated that small investors have also withdrawn from bullish positions there. Data from the Deutsche Bank Research Department show that overall, since late January, the number of stock subscriptions has fallen to a large extent.

Parag Thatte, a strategist at Deutsche Bank, said: “Our argument is that the decline in the number of calls is due to the fact that people are getting out more and more.” “Whether it’s air passengers, The increase in restaurant reservations is still [an uptick in usage] Everything in Apple Maps is growing. “

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Market observers say that as Covid-19 restrictions continue to be lifted across the United States, it is reasonable to expect individual investors to invest part of their funds in the economy after a year of backlog of demand, rather than in brokerage accounts. However, few people expect retail investors will gradually disappear. VandaTrack data shows that as technology stocks have begun to rebound, buying activity in US stocks has begun to be active in recent days.

Devin Ryan, director of financial technology research at JMP Securities, said: “People are more engaged than ever before.” He pointed out that trading activity is still higher than in many periods in 2020.

Ryan continued: “I think there will be ups and downs in participation, and the question is more about the normalization level.” “If… it settles in a place that is much stronger than what it experienced before the pandemic, and It may even exceed last year’s level, and I won’t be surprised.”

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