Individual investors started 2021 at a sprinting pace. Now they are finally showing signs of fatigue.
Trading activity among retail investors has slowed in recent weeks following a blockbuster of the year, with the group plowing less money into everything from US stocks to bullish call options. The daily average trades for at least two online brokerages have fallen from their 2021 highs. And across the industry, traffic to broker websites has fallen, as has the amount of time spent on them.
The decline in enthusiasm marks a sharp turnaround from a few months ago, when the hectic activity of individual investors took center stage in the financial markets. When “meme” shares skyrocketed in January, millions of retail investors stepped in, accelerating an already robust trend in retail investing. In a mania unlike anything market observers had ever seen, individual investors sent stocks like GameStop Corp. up, pushing brokerage platforms to the top of the app store rankings. Trading volume soared that many brokers struggled to keep their platforms running smoothly.
The recent downturn is driven by a range of factors, according to individual investors and analysts, including concerns about the volatility of growth stocks – a group in which retail investors are often heavily invested. Since February 12, when the tech-heavy Nasdaq Composite hit its most recent record, the favorites of individual investors including Tesla Inc., NIO Inc. and Apple Inc. each decreased by more than 9%.
“Like any investor, you’re not going to add fresh money to a market that doesn’t have a clear catalyst for moving stocks up 5% to 10%,” said Viraj Patel, global macro strategist at Vanda Research. “Retail investors have gone into hibernation in recent weeks.”