It’s a bubble, according to a survey of retail investors. And they don’t want to get lost.
An E * Trade Financial survey found that approximately three-quarters of retail investors believe the market is “totally or slightly” in a bubble, a 3 percentage point increase over the previous quarterly survey. At the same time, bullish sentiment has risen, reaching pre-pandemic levels by 61%.
“Optimism grew as the market reached new all-time highs, vaccines increased, stimulus measures continued and profit estimates were high,” said Mike Loewengart, CEO of Investment Strategy at the firm.
Stocks have been in tears for over a year and for most of that time bubble warnings have popped up. But the last stretch has expanded valuations to the levels last seen in the dot-com era and, with yield growth, the heart has grown so strong that retail investors have taken note. But most ignore it, as they did when the S&P 500 raised 83% of pandemic lows, betting that there will be money to be made as long as government spending and the Federal Reserve keep politics loose.
They have constantly bought when professionals shunned and made first bets on stocks that would benefit more than a return to normal economic activity. Over the past twelve months, they have plowed an average daily stock of $ 1.2 billion, according to VandaTrack data.
Source: E * Trade Financial
In some circles, relentless buying by individual investors raises concerns that the group is willing to withdraw, creating a risk for the wider market. According to an estimate by JPMorgan Chase & Co., the equity allocation of US households probably increased to 40% in April, surpassing the maximum point as and reaching the highest level since the beginning. of the fifties.
At various times in the past year, the retail frenzy has caused concern for professional investors who warned that their participation, similarly in the early 2000s, meant too much euphoria. But they have not yet escaped. At Bank of America Corp., individuals were net buyers of shares for a sixth consecutive week, according to the firm’s latest data on customer funds. This contrasts with professional investors who took advantage of recent gains to unload stakes.
E * Trade has surveyed nearly 1,000 retail investors who manage at least $ 10,000 in their online brokerage accounts. The survey also showed that nearly half believe the economy is in better shape, up 15 percentage points from the previous quarter’s results. And while concerns about the risks associated with the virus fell amid the recent deployment of vaccines, concerns about market volatility have risen and are now classified as the main risk to investor portfolios, according to the poll.
According to Max Gokhman, head of asset allocation for the Pacific Life Fund, whether retail investors continue to play a major role in the markets will depend on what happens when there is a significant setback. Advisors.
“What happens when there is no new fuel for this rocket to the moon? A lot of people with diamond hands may realize that they have overpaid for poor quality cubic zirconia, ”he said, referring to a popular phrase that described bullish presumption. “If they stay in the markets after that, it will determine the long-term effect of retail.”