In “What Happened To The ‘Stimmy’ Surge?,” I jokingly lamented the apparent lack of follow-through from retail investors, who many assumed would immediately transfer at least a portion of any new stimulus funds received to their online brokerage accounts.
From there, Janet Yellen’s altruism would find its way into GameStop or AMC or mega-cap tech or deep out-of-the-money calls.
It wouldn’t be so much different from Yellen’s days as Fed Chair, really. Back then, she underwrote various manifestations of the carry trade and helped inflate the short vol bubble, precipitating the same kind of media coverage one often comes across today. The tale of a big-box retail logistics manager quitting his job to short vol from his living room was, in a sense, “peak Yellen.”
As quarter-end nears, there’s some evidence to suggest that day-traders and the Robinhood set have lost some of their joie de vivre, or at least when it comes to equities. Call option volumes are down and the frothiest areas of the market have struggled, especially in the face of rising US rates (figure below).
As documented briefly in the linked article (above) some of this is perhaps due to downbeat sentiment tied to the selloff in tech that accompanied the rates tantrum.
The Nasdaq 100 corrected, and shortly thereafter, long-term Treasurys fell into a bear market (figure below).
Retail manias have a way of feeding on themselves. In the same vein, when the tide goes out, they can fizzle quickly, especially when the headlines aren’t dominated by tales of quick riches.
As one CIO told Bloomberg on Wednesday, “when you see something [that’s] done exceptionally well, there’s increased interest [but] after that hype sort of fizzles out, you see retail interest tend to recede.”
There’s a lot of “receding” to do, that’s for sure. “In the recent past there’s been growing concern about rampant retail investment in the stock market, particularly in the US,” Goldman wrote this week, adding that “the volume of retail trades… has been breathtaking.”
It could be — and I’m just speculating here — that some of the “disinterest” from the retail crowd is down to Spring Break and the gradual reopening of the services sector.
That’s a euphemistic way of saying that to the extent the surge in retail activity was attributable to young investors and traders stuck at home, with nothing to do, now it’s time for Jägerbombs again.
I dismissed that narrative on Tuesday, but I’m coming around to it. Maybe it’s just me being slightly irritated by the demonstrable uptick in the number of people congregating on “my” stretch of beach just off the back deck. (It’s not “mine,” but over the years, I’ve become possessive.)
Of course, flows into equities are still strong indeed (breakdown below). In fact, they’re off the charts if you annualize the YTD figures.
But inflows into mutual funds and ETFs are something entirely different from spending thousands of pennies on calls or putting your last (and only) $20,000 into Tesla.
As late as February 11, Robinhood was among the top five free iPhone apps. On Wednesday, it had fallen all the way to the 105th slot.
And just in time for the company to go public.