(1/8) If we just focus on returns, buying the dip has worked well for retail investors. As @FortuneMagazine wrote earlier this month, “Retail investors outperformed in part because they were quick to snap up value stocks as the rally gained traction...
(2/8) ...since mid-May, the rally has shifted toward cyclicals, small-caps, and economically sensitive stocks, Goldman notes. “Stocks with these qualities…were quickly embraced by value-seeking retail investors, and now make up a large portion of our retail basket.”
(3/8) Retail investors have apparently even outperformed seasoned hedge fund managers. The Twilight Zone is real. But, as we have discussed over the last few weeks, to what extent isn’t this actually fair?
(4/8) To what extent isn’t this simply a way for the other 99% to participate in the upside of a roaring stock market? Asked differently, why should retail investors not be allowed to capture some of the free stimulus money that is driving markets ever higher?
(5/8) The key question surrounding retail investor’s involvement in the markets is how long this trend can continue? How long can they keep bidding for bankrupt stocks like $htz, $gnc or $val, and come out on the other side as (temporary?) winners in the craft of trading?
(6/8) And when the market turns south, if it ever does, could we have even further social unrest as the retail segment sees their profits evaporate?
(7/8) The average Robinhood trading account size is $1,000-$5,000, which is a much smaller asset base than its competition (E-Trade, for example, is almost $70,000), but remember that prior to COVID, 40% of Americans did not have $500 to cover an emergency life event.
(8/8) More than a David and Goliath battle of egos between retail and professional investors, we’re just hopeful that this retail mania does not add on to the already fragile social infrastructure we currently live in.
