In the last twelve months, young retail investors have demonstrated a “refusal to bend,” putting a floor under four 2021 selloffs to date and raising questions as to whether their devotion will continue to bolster markets. This according to a recent Bloomberg article.
“There’s a lot of young people in the accumulation phase,” according to Dan Egan, managing director of behavioral finance and investing for Betterment, who added that younger investors have used selloffs as buying opportunities.
The article reports that four times this year, the S&P 500 closed 3% below an historic high, each time rebounding to a record, showing “how difficult it’s been to dislodge the retail traders who have fueled the rally.” But Bloomberg stock strategist Gina Martin Adams suggests that the recent market retreat could be stickier: “Leading indicators imply a breakdown in stock prices remains most likely in the interim.”
The article notes other signs that bode well for bulls, including volatility measures that point to buying opportunities and an uptick in options trading. “For many strategists,” the article notes, “the current retreat is a blip before the reflation trade reasserts itself once again. That would imply stocks sensitive to the economic reopening will stage a comeback, with cyclical and value-oriented sectors of the market standing to benefit the most.”