Individual investors withdraw their markets after the exhibition until 2021

Individual investors started 2021 at a rapid pace. Now they are finally showing signs of fatigue.

The trading activity among non-professional investors has slowed in recent weeks after a leading year, with the group spending less money on everything from US stocks to bullish call options. The daily average trading for at least two online brokers has declined from their 2021 highs. And across the industry, traffic to brokerage sites, as well as the amount of time spent on it, has dropped.

The decline in enthusiasm is a sharp turnaround from a few months ago when the insane activity of individual investors was the center of the financial markets. While “meme stock” stocks soared in January, millions of small investors piled up, kicking off an already robust trend toward small investments to an excessive degree. In a mania, unlike market observers have never seen, individual investors bought stocks like GameStop Corp. GME soared by 0.86%, pushing brokerage platforms to the top position of the app store. The trading volume increased so much that many brokers struggled to keep their platforms running smoothly.

According to individual investors and analysts, the recent downturn is a series of factors, including concerns about volatility in growth stocks – a group in which small investors tend to be heavily invested. Since February 12, when the technology-heavy Nasdaq Composite reached its latest record, individual investors, including Tesla Inc., NIO Inc. and Apple Inc., each dropped more than 9%.

Ticker	Safety	Last	Alter	Alter%
GME	GAMESTOP	191.45	+1.63	+ 0.86%
TSLA	TESLA, INC.	661.75	-6.18	-0.93%
NIO	NIO INC.	39.66	+0.68	+ 1.74%
AAPL	APPLE, INC.	123.00	+0.85	+ 0.70%

“Like any investor, you are not going to add fresh money to a market that does not have a clear catalyst to drive stocks 5 to 10% higher,” says Viraj Patel, global macro strategist at Vanda Research. have been hibernating for the past few weeks. “

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The broader S&P 500, meanwhile, continued to pull higher and ended last week with a record 7% in 2021. This is largely due to an increase in the shares of cyclical companies in the financial, industrial and energy sectors that tend to improve. to perform. when the economy recovered – but which was historically less popular with individual investors.

Since mid-February, the average non-professional investor has outperformed the S&P 500 by about 10%, estimates VandaTrack’s streamlining, a backlog that the company apparently contributed to the retreat. To try to compensate for their losses, individual investors switched to more economically sensitive companies in March, including Boeing Co., Starbucks Corp. and JPMorgan Chase & Co, show the data from VandaTrack.

Ticker	Safety	Last	Alter	Alter%
BA	THE BOEING CO.	252.96	-1.76	-0.69%
SBUX	STARBUCKS CORP.	109.38	+0.11	+ 0.10%
JPM	JPMORGAN CHASE & CO.	153.71	+1.48	+ 0.97%

Although few analysts expected trading to continue indefinitely at the end of January, many expected individual investors will increase during the spring, especially after President Biden signed the latest stimulus package, which included $ 1,400 in direct payments to Americans in March. . . Many expected the checks to make a purchase and surpass the previous rise following the two previous incentives.

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Instead, the stimulus boom never came – and sales declined. Recently, according to VandaTrack data, individual investors’ daily net purchases of US equities and exchange traded funds reached their lowest level for the year.

On March 26, individual investors bought about $ 772 million of US stocks on a net basis, a 60% drop from the nearly $ 2 billion reached in just one day on January 29, at the peak of the meme shares . The last two times that stock purchases by individual investors were lower was on Christmas Eve and the Friday after Thanksgiving in 2020. Both days have seen the historical trend towards a lower volume in the stock market.

Analysts say they are closely monitoring other metrics, including trading activity and website traffic at brokerage firms. Charles Schwab Corp and Interactive Brokers Group Inc. recently reported that daily average trading declined in March compared to their 2021 highs.

Ticker	Safety	Last	Alter	Alter%
SCHW	CHARLES SCHWAB	66.44	+1.26	+ 1.93%

Meanwhile, the analysis company SimilarWeb, which tracks traffic on mobile and mobile phones to brokerage sites, found that companies across the industry experienced a sharp decline in traffic in March, compared to February. Robinhood Markets Inc. for example, saw a 35% decrease in traffic, according to SimilarWeb, whose data does not record traffic via apps.

Charles Hornat, a 50-year-old information security specialist and deputy professor at New York University, is such an investor who recently sat on the sidelines as many of the growth stocks he owns have lagged behind. He estimates that his portfolio has fallen by about 50% since the beginning of February, mainly due to his positions in companies including Tesla, Snap Inc. and the special acquisition company Churchill Capital Corp. IV.

Ticker	Safety	Last	Alter	Alter%
SNAP	SNAP, INC.	54.49	+2.20	+ 4.21%

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Mr. Hornat started trading in the fall of 2019, and for a while it seemed like stocks were just going up.

“I thought, ‘It’s so easy, it’s amazing,’ and then Covid-19 hits and everything turns around,” he said. ‘I learned through the first up and down that [trading through a drawdown] was something I did not have the experience about … So I took a breather over the last few weeks and said ‘I have unrealized losses and I’m fine with that. I sit down and drive it out. ‘”

Recently, Mr. Hornat said he executed several small volumes of Tesla deals to get movements in the stock. Otherwise, he said, he believes in the companies he owns and plans not to sell or buy.

“Because there is so much unknown, I do not believe I am doubling,” he said. However, he said: “I think it’s when you learn about diversifying your portfolio and things like that.”

Analysts are also watching the activity in the options market, which recently indicated that small investors have also retreated from their positive positions there. Data from Deutsche Bank Research have generally fallen sharply since the end of January.

“Our thesis is that the decline in call volumes is driven by the fact that people are moving more,” said Parag Thatte, a strategist at Deutsche Bank. “Whether it is the increase in airline passengers, restaurant bookings or [an uptick in usage] from Apple Maps, go all out. ”

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As Covid-19 restrictions continue to be lifted across the U.S., it is reasonable to expect individual investors to use some of their money after a year of pent-up demand in the economy instead of brokerage accounts, market observers say. Yet few expect individual investors to disappear. VandaTrack data already shows that U.S. stock buying has increased over the past few days as technology stocks begin to recover.

“People are getting more engaged than they have historically been,” said Devin Ryan, director of financial technology research at JMP Securities, saying trading activity is still higher than many periods of 2020.

“I think there is an expectation that there will be a decline in and a flow to engagement, and the question is more what the normalized level is,” Ryan added. “I would not be surprised if … where it is going to settle is a little stronger than what was experienced before the pandemic and possibly even higher than last year’s points.”