After a long absence, active individual investors have returned. While breakneck and foolhardy trading activity in shares of GameStop Corp. GME, +19.20% has dominated the headlines, unanswered questions remain as to whether a broader resurgence in retail trading will last and what it will mean for the stock market as U.S. benchmark indexes march to all-time highs.
That sort of trading feels more like gambling than investing, he said, noting that “frothy” market action tends to fade quickly away. But others argued that many individual investors, whose ranks aren’t made up soley of rapid-fire day traders, were likely to stick around. But the market volatility created by the GameStop situation served as a wake-up call, the analysts said.
“Rather than criticizing retail investors and their behavioral pattens, it is better to slot them into the money equation,” they wrote. “After all, it is not only office workers who are locked down at home on snowy days but also very active day traders with access to inexpensive platforms.” Indeed, some market watchers have argued that the conventional branding of individual investors as the “dumb money” looks increasingly misguided, particularly after the GameStop episode showed supposedly “smart money” investors shorting more than 100% of the company’s stock, leaving them wide open to a painful short squeeze.
Once the stimmy checks hit the market, the cantillionaires will harvest those last few bps, and pull the rug out. Rinse and repeat.