(Bloomberg) — A rally across asset classes, propelling the S&P 500 to its best month in more than a year, has finally caught the attention of retail investors.
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The same traders who created the so-called meme stock mania, with big bets on speculative companies, are back. And they’re rushing into the market’s favorite stocks — think Amazon.com Inc. and Nvidia Corp. – while buying riskier bets like no-profit tech and anything crypto, according to data from investment platform eToro and discussions on social media, the same platforms. used to fuel a surge in GameStop Corp. more than two years ago.
Individual investors are “being optimistic and buying into the rally” after a few weeks of economic indicators that have bolstered overall sentiment, Jason Goepfert, founder and principal analyst at Sundial Capital Research, said by phone.
The slowdown in economic data reassured investors that the Federal Reserve’s interest rate hike campaign was over. This time, retail traders have been slow or even “hesitant to join the rally,” Goepfert said. Their late arrival, however, could further fuel the rise in power.
The S&P 500 index posted one of its biggest November gains on record, jumping 8.9% for its second best monthly performance since 1980, as speculative coins including Bitcoin and meme stocks like GameStop, recorded gains. The world’s largest cryptocurrency by market value has reached its highest level in 18 months.
Retail investors account for about 18% of daily equity market volumes, according to Bloomberg Intelligence. A September eToro Retail Investor Beat survey found that 93% of these traders in the United States plan to invest the same amount of money or more in stocks through the end of the year.
The purchase comes as the closely watched bull-bear spread in the American Association of Individual Investors survey showed the most bullish stance for the group since July, near levels not seen since April 2021, when the market bullishness was still raging.
eToro saw a surge in trading in stocks like Tesla Inc., Amazon and chipmaker Nvidia. Open crypto positions on eToro’s US platform also increased by 28% in November month-over-month.
“The average deal size has been noticeably higher, which tells me that people feel comfortable enough about the future to risk larger amounts of money,” said Callie Cox, a U.S. investment analyst. at eToro.
The five most popular stocks on eToro mostly mirrored those mentioned on Reddit’s WallStreetBets and the StockTwits chatroom. Tesla remained the group’s favorite company while Nvidia and Meta Platforms Inc. captured retailers’ attention.
The group’s craze for short-dated call options, a calling card of the 2021 stock boom, has fueled a stunning rally in GameStop, with Reddit users encouraging each other to buy shares ahead of the stock’s earnings. next week.
As trend-following traders have become more comfortable with the idea of a new rally, “large institutional investors have started to express some doubts,” Goepfert said.
Investors looking for signs that the market is reaching a peak of near-term optimism could receive exactly the message they need from the bubbling enthusiasm among meme stock traders.
“Strictly from a contrarian sentiment perspective, now is the time to be cautious in the short term,” wrote Peter Boockvar, author of the Boock Report, referring to the latest AAII reading. “The positivity of individual investors has now become extreme. »
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