The big stock market story in the late winter and early spring of this strangest of years has, of course, been the huge surge in amateur investors. All the controversy, the forums and the GameStop hot tickets all culminated in a $1.2 billion a day peak in February 2021, which for some, was so momentous it led many to believe that this was just the tip of the iceberg.
Perhaps it still will be – nothing is for certain in uncertain times. Right now though, the ice appears to be thawing with a 20 percent drop from that heady peak, according to Vanda Research’s data. Considering the momentum and enthusiasm which followed many of these amateur investments – and indeed the stocks they had propelled such a short while ago – it seems understandable that many thought a second round of fiscal stimulus checks would create a whole new wave of investments similar to what we saw a little over a month ago.
However, it would appear that people are suddenly much more hesitant, at least for now. The reason for this shift in attitude is, to a large extent, personal to the individual investor. That said, there are several different areas which many believe to have had a large impact. Some put this change down to the roll out of vaccinations, and the expected opening of more and more of the United States as that process continues. This has had an impact on people’s spending priorities.
Renewed national optimism
The Conference Board has suggested a “renewed optimism” across the country has meant that some people would now prefer to spend their additional cash on luxury items, such as cars or new homes. It’s likely that many are also now seeing the possibility of being able to go on holiday or to public events sometime in the near future as an additional reason to save rather than invest. Indeed, a switch in consumer spending has already become evident, with the number of flight bookings rising higher than any time since the pandemic began.
In addition, while investor confidence remains high, many high performing stocks which peaked during that trading frenzy have underperformed in recent weeks. This means that many will be unwilling to invest more while their existing stock fails to deliver. Additionally, those looking to dip their toes into financial waters may be unnerved by the underperformance of several high profile tech companies. These have been hit by both the rise of long term bond yields and by the difficulty of the recovery from such an economically devastating pandemic.
Tracking behavior of amateur investors largely speculative
To an extent, all discussion on the behavior of amateur investors is speculation, but there are two common threads amongst all which appear to be the most salient points. One is that, just as the Coronavirus has impacted virtually all aspects of our lives, it’s a factor in pretty much every explanation of these changes in amateur investor behavior. The other is, whichever way you look at it, there are more people who would rather spend their money than invest compared to just a couple of months ago.