U.S. retail investors have been dip buyers so far in 2022, taking shares that funds have thrown out of their portfolios in light of a more hawkish Federal Reserve, but focusing on quality stocks as opposed to speculative names.
Growth and technology stocks, which typically generate lower returns in higher-yield environments, have had a rocky start to the year as large investors respond to expectations that the Fed will raise interest rates as many as four times in 2022, driving the short-term treasury. gives to almost two year heights.
Still, weakness in equities has been met with retail investors looking for opportunities to buy. On Monday, after falling nearly 3% earlier in the day, the technology-heavy Nasdaq caught up with all of the day’s losses in afternoon trading, and it rose again on Tuesday.
“Buy the dip has been successful for how many – 8 or 10 years now – and I think people still see opportunities when they look for potential investments, and the US stock market is still the best game in town, “said JJ Kinahan, chief marketing strategist at retail brokerage firm TD Ameritrade, which is owned by Charles Schwab Corp.
Customers at TD Ameritrade returned to buying this month after being net sellers in December, with big sales in the final week of the year as the Omicron COVID-19 wave began to hit hard, Kinahan said.
The busiest day this year for Apex Clearing, which handles trades for brokerage firms, including SoFi Technologies Inc and Firsttrade, was January 5, when the S&P 500 fell about 2% with a buy-to-sell ratio of 1.91, a spokesman for said the company. S&P experienced a similar decline the next day, and retail investors were again net buyers, she said.
Individual investors have focused on stocks like Tesla Inc and Apple Inc, as well as technology-focused and leveraged exchange traded funds (ETFs), while reducing their purchases of securities related to gaming, space exploration and cannabis themes, said Giacomo Pierantoni, head of data at Vanda Research.
“Retail investors continue to buy big business technology and ETFs, giving a padding, but they are not buying aggressively the fall in speculative assets,” such as cryptocurrencies and hyper-growth stocks, he said.
As risk appetite remains low, some of the most important choices in the past week for TD Ameritrade customers have been major technology stocks such as Apple and Microsoft Inc Corp, as well as blue chips, including McDonald’s Corp, Walt Disney Co and AT&T Inc. said Kinahan.
Retail investors have become a major force in the markets in the last few years, as retail brokerage firms have switched to commission-free trading, and social media has made it easier for individuals, many working from home due to the pandemic, to coordinate trading ideas. It can put them at odds with the patterns of institutional investors.
Bank of America Securities analysts said retail and hedge funds were buying US equities last week with about $ 500 million in net purchases as the S&P 500 fell 1.9%. The bank’s institutional customers, meanwhile, began the year with their largest outflow since mid-January 2021.
That phenomenon was also seen Monday as retail investors reached their third consecutive day buying more than $ 1 billion in shares, according to a note from JPMorgan analysts.
Monday’s net total of $ 1.07 billion in retail shares was in the 93rd percentile of historical data, they said. This is in contrast to institutional investors, who have been net sellers.
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