The Retail Stock Market Is Booming - Here's What Investors Are Buying

According to Trade Algo, retail investors put a record amount of money into the stock market in January.

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They made the largest-ever daily average investment into American markets, amounting to $1.51 billion, the business discovered.

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Throughout the second half of last year, this investor group has continued to influence US equity market fluctuations. It would be foolish to undervalue the relevance of the retail cohort given that recent surveys indicate the institutional investor community is still generally adverse on stocks, senior vice president of Vanda Research Mario Iachini wrote in a report on Thursday.

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During the Covid epidemic, retail investors' interest in the market increased, at one point sparking a meme-stock frenzy. During the bear market and amid rising interest rates, their interest waned; however, it has just increased once more as the stock market is off to a terrific start in 2023.

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Marko Kolanovic, the top global market strategist at JPMorgan, recently made a similar observation.

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In a message to clients on Wednesday, he stated that "retail activity (volumes) are near record high with over 20% of all market volume originating from retail orders."

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According to Trade Algo, the top securities purchased by retail investors this year as of February 15 are shown below.

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Beyond these top 10 names, though, Iachini noted that a lot of smaller-cap stocks have seen sizable inflows this year. For instance, Cathie Wood's ARK Innovation ETF saw inflows of $169 million and Rivian Automotive saw inflows of $226 million. A total of $154 million was invested in Shopify, an ARKK holding.

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In fact, according to Iachini, this year has seen a rise in both retail purchases of the ARKK ETF and some of its holdings.

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"Buying ARK ETFs while simultaneously buying in some of their more touted underlyings was usual for ordinary investors back in 2020–21," he said. Yet, it is noteworthy that retail investors are far surpassing Cathie Wood and Co. regarding purchases across some of these stocks, even if we don't anticipate retail speculation to reach similar levels for the reasons mentioned above.

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Iachini predicted that as earnings season draws to an end and investors begin to get ready for tax day in mid-April, retail inflows will somewhat slow down in the upcoming weeks.

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To the contrary, he said, "if broad equities markets continue to perform well, we may see flows migrating into smaller, more speculative companies."

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"Buying ARK ETFs while simultaneously buying in some of their more touted underlyings was usual for ordinary investors back in 2020–21," he said. Yet, it is noteworthy that retail investors are far surpassing Cathie Wood and Co. regarding purchases across some of these stocks, even if we don't anticipate retail speculation to reach similar levels for the reasons mentioned above.

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Iachini predicted that as earnings season draws to an end and investors begin to get ready for tax day in mid-April, retail inflows will somewhat slow down in the upcoming weeks.

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To the contrary, he said, "if broad equities markets continue to perform well, we may see flows migrating into smaller, more speculative companies."