According to estimates from Morgan Stanley, new investors who dove into the market at the start of the pandemic have now lost everything they gained, reports an article in Bloomberg. The speculative companies that surged with those investors’ money—fueled with capital from the Fed—are now in stagnant bear market, and when the Fed pivoted to a hawkish stance in November those investors were left wondering what to do.
But it’s entirely possible that those DIY investors could rebound, the article contends. Every time their favorite stocks are on the verge of tanking, individual investors utilize their zero-commission trading accounts to pull them off the ledge. Still, many big-name companies that soared during the frenzy have been battered: AMC Entertainment is down 48% this year alone, and 78% since June 2021, while Peloton Interactive Inc—an early pandemic darling—is down 90% from its record high.
It’s a dizzying tumble from the days of early 2021, when individual investors banded together online to overthrow the Wall Street world order, at one point accounting for about 24% of all stock trading. But even with roughly $9 trillion gone from the value of U.S. equities this year, that group of day-traders has stayed relatively firm in their position compared to institutional money managers who have pulled way back. That retail trading behavior might be something to watch for those looking for an indication of the market’s bottom, says Morgan Stanley analyst Christopher Metli. “…the next leg of de-risking is likely to be more gradual, coming from asset allocators/real money/retail and is therefore likely slower to play out, making a precise bottom more difficult to call,” Metli wrote in a note that is quoted in the Bloomberg article.
However, in a sign that day traders could be retreating from the market, April saw the second-slowest uptake since the end of 2020, with $14 billion in stocks purchased by retail traders. Personal savings accounts have tripped back to pre-pandemic levels, leaving individual investors less disposable income to play the market with, and many of those newer investors don’t have the stomach to ride the wave through volatile waters.