Individual investors started 2021 at a rapid pace. Now, they are finally showing signs of fatigue.
Trading activity among non-professional investors has slowed in recent weeks after a highly successful start to the year, with the group investing less money in everything from US stocks to bullish call options. Average daily trades of at least two online brokers are down from their 2021 highs. And across the industry, traffic to brokerage websites, as well as the amount of time spent on them, has decreased.
The decline in enthusiasm marks a sea change from a few months ago, when the frenzy of individual investors took center stage in financial markets. As “meme stocks” stocks soared in January, millions of small investors piled in, fueling an already strong retail investment trend into overdrive. In a mania unlike anything market watchers had ever seen, individual investors sent stocks like GameStop Corp. skyrocketing, pushing brokerage platforms to the top of app store rankings. . Trading volume increased so much that many brokerages had trouble keeping their platforms running smoothly.
Individual investors and analysts say that what is driving the recent pullback 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 high-tech Nasdaq Composite hit its most recent high, individual investor favorites including Tesla Inc., NIO Inc. and Apple Inc. have each fallen more than 9%.
“Like any investor, you are not going to add fresh money to a market that does not have a clear catalyst to drive stocks 5-10% more,” said Viraj Patel, global macro strategy at Vanda Research. “Retail investors have gone into hibernation in the last two weeks.”