Search

Retail traders account for 10% of U.S. stock trading volume - Morgan Stanley

Retail investors currently account for roughly 10% of daily trading volume on the Russell 3000, the broadest U.S. stocks index, after peaking at 15% in September as lockdown boredom and extra savings triggered interest in stock markets, Morgan Stanley said on Wednesday.


The retail frenzy from last summer carried over into 2021 with so-called “meme stocks” like GameStop and AMC Entertainment rapidly soaring more than 1,000 percent, leaving professional traders perplexed.


The average daily trading volume on the Russell 3000 index over the last five days was $380 billion, according to Refinitiv data, meaning individual traders contributed around $38 billion a day.


European retail investors on the other hand make up a 5% share of total market volume, Euronext recently said.


Morgan Stanley says the phenomenon has prompted many questions from its clients about how to effectively estimate retail activity.


“We find that retail investors tend to prefer companies in sectors they are likely to be familiar with as consumers, such as consumer discretionary, communication services, and technology,” the U.S. investment bank said in a note.


Applying its own methodologies, Morgan Stanley found that over the five-year period from July 2016 to June 2021, stocks with high retail participation continued to outperform stocks with low retail participation over the subsequent one month.


The bank’s number crunching also highlighted that these traders have bifurcated quality preference, with greatest activity in high quality and junk names.


Meta Material, formerly Torchlight Energy, was the latest name to see huge speculative bets by small individual traders. Clover Health Investments and Koss Corp were other names that made headlines on a retail trading frenzy.


Seven of the 11 majors S&P sectors rose, with economy-linked industrials (.SPLRCI), materials (.SPLRCM) and energy (.SPSY) among the biggest gainers. Energy jumped 0.4% on the back of higher oil prices.


Tesla Inc (TSLA.O) gained 4.3% as the electric vehicle maker opened a solar-powered charging station with on-site power storage in China and as bitcoin prices retraced some losses. read more


At 11:26 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 11.66 points, or 0.03%, at 33,933.92, the S&P 500 <.SPX> was up 1.45 points, or 0.03%, at 4,247.89, and the Nasdaq Composite (.IXIC) was up 16.05 points, or 0.11%, at 14,269.32.


Nikola Corp (NKLA.O) gained 3% after the electric and hydrogen vehicle maker said it is investing $50 million in Wabash Valley Resources LLC to produce clean hydrogen in the U.S. Mid-West for its zero-emission trucks.


Among so-called meme stocks, software firm Alfi Inc (ALF.O) dropped 26.8% after more than doubling in value in the prior session, while Torchlight Energy Resources Inc (TRCH.O) slumped 30.1% for the second day after announcing an upsized stock offering.


Advancing issues outnumbered decliners by a 1.72-to-1 ratio on the NYSE and by a 1.43-to-1 ratio on the Nasdaq.


The S&P index recorded 30 new 52-week highs and no new low, while the Nasdaq recorded 73 new highs and 18 new lows.


Reporting by Devik Jain and Medha Singh in Bengaluru; Editing by Maju Samuel

17 views0 comments

Recent Posts

See All