Individual investors started 2021 at a fast pace. Now, finally, they show signs of fatigue.
Trading activity among non-professional investors has slowed in recent weeks after a start of blockbusters, with the group devoting less money to everything from US stocks to bullish buying options. Average daily operations of at least two online brokerages have dropped from 202 highs. And across the industry, traffic to brokerage websites, as well as the amount of time spent on them, has fallen.
The decline in enthusiasm marks a sharp setback in recent months, when the frantic activity of individual investors occupied a central place in the financial markets. As stocks of “meme stocks” skyrocketed in January, millions of small investors rallied and sparked an already robust retail investment trend. In a mania different from any market watchers have ever seen, individual investors sent stocks like GameStop Corp. which increased, pushing brokerage platforms to the top of the app store ranking. The trading volume increased so much that many brokers struggled to keep their platforms running smoothly.
Boosting the recent downturn, investors and individual analysts say, is a number of factors, including concerns about the volatility of growing stocks, a group in which small investors tend to invest heavily. Since February 12, when the Nasdaq Composite, which has a lot of technology, hit its most recent record, the favorites for individual investors, including Tesla Inc., NIO Inc. and Apple Inc., have each fallen more than 9%.
“Like any investor, it will not add fresh money to a market that does not have a clear catalyst to drive stocks 5% to 10% more,” said Viraj Patel, global macro strategist at Vanda Research. “Retail investors have gone into hibernation in recent weeks.”