Individual investors have started 2021 at a fast pace. Now, I’m finally showing signs of fatigue.
Trading activity among non-professional investors has slowed in recent weeks, following a blockbuster earlier this year, with the group investing less money in everything from US equities to stock options. Average daily transactions for at least two online brokerages have fallen from their 202 highs. And across the industry, traffic to brokerage sites, as well as the amount of time spent on them, has declined.
The decline in enthusiasm marks a sharp reversal from just a few months ago, when the frantic activity of individual investors occupied a central place in the financial markets. As stocks of “meme stocks” rose in January, millions of small investors piled up, giving an already robust trend for overdrive retail investment. In a mania different from what market observers had ever observed, individual investors sent shares such as GameStop Corp. growing, pushing brokerage platforms to the top of the app store rankings. The volume of transactions has increased so much that many brokerages have tried to keep their platforms smooth.
The downturn, say individual investors and analysts, is a number of factors, including concerns about rising stock volatility – a group in which small investors tend to be heavily invested. As of February 12, when the technologically powerful Nasdaq Composite hit its most recent record, the favorites of individual investors, including Tesla Inc., NIO Inc. and Apple Inc., each down more than 9%.
“Like any investor, you will not add new money to a market that does not have a clear catalyst to increase stocks by 5% to 10% higher,” said Viraj Patel, global macro strategist at Vanda Research. “Retail investors have been hibernating for the past two weeks.”