We’ve spent a ton of time over the last month documenting the mad dash into equities that helped propel stocks to a truly remarkable January.
That mad dash certainly seems to suggest that if retail investors were indeed still sitting on the sidelines, they’re in the game now thanks in no small part to Donald Trump’s incessant tweeting about a stock market rally that began eight years prior to his presidency.
Another thing that mad dash succeeded in doing was making stocks the most overbought in history on some metrics. At one point, the S&P had spent the longest stretch in overbought territory in more than two decades and last month, the index also broke a record for the longest stretch without a 5% correction.
The “fear of missing out” meme was enshrined in a BofAML note by Michael Hartnett who, the following week, warned that the avalanche of inflows into equity funds had helped push the bank’s Bull & Bear indicator to flash a “sell” warning.
“Danger Will Robinson.”
That was last Friday and sure enough, the S&P promptly had two consecutive 50bp+ selloffs for the first time since 2016 as everyone suddenly panicked about the ongoing bond rout.
Hilariously, retail kept right on buying SPY on the way to this:
UNREAL, another $5b into ETFs last night, brings Jan total to $78.6b, which destroys all-time monthly flow record by $18b (or 30%), this is a nearly $4b/day pace.. pic.twitter.com/h4OaSxAHVz
— Eric Balchunas (@EricBalchunas) February 1, 2018
Last weekend, we highlighted a Wall Street Journal article that contained the following rather disconcerting commentary and accompanying visual:
Discount brokerages TD Ameritrade Holdings Corp., E*Trade Financial Corp. and Charles Schwab Corp. reported surges in client activity at the end of 2017 that have accelerated in January.
The firms attributed much of the activity to retail, or individual, investors who are opening brokerage accounts for the first time, some of them lured by the boom in cryptocurrency and cannabis investments .
Well in light of that, and considering the rather rocky week stocks have had (relatively speaking, because everything looks like a blip on the radar screen when you consider the scope of the rally off the 2009 lows), we thought we’d highlight two followup charts.
First, have a look at this simple yet poignant visual, derived from TD’s FYQ1 results:
There’s your retail interest. That’s a nearly 50% y/y rise in client activity.
“The Company reported record client trading activity of approximately 726,000 client trades per day, on average, and gathered a record $26.5 billion in net new client assets for the quarter,” TD boasted late last month, on the call.
But that’s perhaps less scary than this:
See any difference between those two peaks? Hint: in October 2008, there was actually a dip worth buying.