Over the last two days, retail traders sold $1.9 billion worth of shares, making it the most significant two-day outflow in 14 months, as stated by brokerage JPMorgan (NYSE: JPM).
Not until last week, they were net buyers of equities, notching the highest level ever registered on May 5, as Vanda (NASDAQ: VNDA) Research stated.
JPM strategist Peng Cheng said that retail buying impulse showed signs of slowing before this latest outbreak of selling.
Increasing borrowing costs, high inflation, and the chance of slowing growth have intensified market volatility this week.
The benchmark S&P 500 is within 2% of establishing a bear market for the first since the epidemic-led crash in March 2020 as the end of easy money pushes investors out of riskier bets.
Retail investors underperforming
Retail investor presence in equity markets has dwindled compared to early last year when aided by fat stimulus checks and low trading fees, and they flocked to online message boards to move markets while remaining locked up in their homes.
As of Wednesday’s market close, U.S. retail traders accounted for approximately 12% of the total volume of shares traded compared to around 20% at the peak in January 2021, JPM said.
The average retail investor has also underperformed the S&P 500, making just about 6% since January 2020 compared to the 24% return of the benchmark index, JP Morgan estimated.
On a client note, retail buying is slowing, Marco Iachini, senior vice-president at Vanda, could be “fatigue rather than outright capitulation” on their part.
