Individual investors started 2021 at a sprinter’s pace. Now, they are finally showing signs of fatigue.
Trading activity among non-professional investors has slowed in recent weeks, after a very successful start to the year, with the group investing less in everything from US stocks to optimistic call options. The daily trading average of at least two online brokers has dropped from its 2021 highs. And across the industry, traffic to brokerage sites, as well as time spent on them, has declined.
The drop in enthusiasm marks a sharp reversal from just a few months ago, when the frenetic activity of individual investors took center stage in the financial markets. As “meme stock” stocks soared in January, millions of small investors huddled together, driving an already robust retail investment trend. In a craze unlike anything market watchers have ever seen, individual investors submitted shares like GameStop Corp. to the heights, taking the brokerage platforms to the top of the app store ranking. Turnover has increased so much that many brokerages have struggled to keep their platforms running smoothly.
What drove the recent downturn, say individual investors and analysts, is a number of factors, including concerns about volatility among growth stocks – a group in which small investors tend to invest heavily. Since February 12, when the Nasdaq Composite reached its most recent record, the favorites of individual investors, including Tesla Inc., NIO Inc. and Apple Inc., have fallen by more than 9%.
“Like any investor, you are not going to add new money to a market that does not have a clear catalyst to raise shares from 5% to 10%,” said Viraj Patel, global macro strategist at Vanda Research. “Retail investors have gone into hibernation in the past few weeks.”