After a significant increase in November, individual investors in the US stock market finally entered the market!
After a big rise in November, individual investors in the US stock market have finally entered the market! The late arrival of individual investors may further drive the stock market up. According to data and discussions, individual investors are buying popular stocks such as Amazon and Nvidia, as well as higher-risk technology stocks and cryptocurrencies. Individual investors account for 18% of the daily trading volume in the US stock market, and a survey shows that 93% of individual investors plan to invest the same or more funds in the stock market before the end of the year. In addition, the US stock market performed well in November, and speculative stocks such as Bitcoin and GameStop also rose. The optimistic sentiment of individual investors may further drive the stock market up.
November was the best month for US stocks this year, finally catching the attention of retail investors, especially those who created the "Meme Stock Craze" and heavily bet on speculative companies, collectively returning to the US stock market.
According to data from investment platform eToro and discussions on social media, retail investors are flocking to the most popular stocks in the market, such as Amazon and Nvidia, while also buying riskier stocks, such as unprofitable tech stocks and all cryptocurrencies.
Jason Goepfert, founder and senior analyst of behavioral finance research firm Sundial Capital Research, recently told the media that after several weeks of economic indicators boosting overall sentiment, retail investors "have shown optimism and bought in the rebound."
Considering a series of weak data, the market is increasingly convinced that the Federal Reserve has ended its rate hike cycle. Goepfert said that although retail investors were slow to act this time, even "hesitant to chase the rally," their late arrival may further drive the stock market higher.
The three major US stock indexes performed well in November, with the S&P up 8.92%, the second-largest increase since 1980, the Nasdaq up 10.7%, the largest monthly increase since July last year, and the Dow up 8.77%, the best monthly performance since October last year.
Speculative stocks such as Bitcoin and GameStop have risen one after another. Cryptocurrencies have rebounded significantly, with Bitcoin rising for the third consecutive month, returning above $38,000. Ethereum soared more than 12% in November, the best month since March and the first month since May with better performance than Bitcoin.
Data shows that retail investors account for about 18% of the daily trading volume of US stocks. A survey of retail investors conducted by eToro in September showed that 93% of US retail investors plan to invest the same or more funds in the stock market before the end of the year.
A survey by the American Association of Individual Investors shows that retail investors' bullish sentiment has reached the highest level since July and is close to the highest level since April 2021.
On eToro, trading volume for stocks of companies such as Tesla, Amazon, and Nvidia has increased significantly. In November, cryptocurrency positions on the eToro US platform also increased by 28% MoM. According to Callie Cox, an investment analyst at eToro USA, "The average trading volume has significantly increased, which tells me that people are confident about the future and willing to take greater risks."
In addition to the top 5 stocks on eToro, stocks mentioned on the "US Stock Bar" Reddit and the WallStreetBets forum and chat room on StockTwits are also popular. Tesla remains the most favored company, while Nvidia and Meta have attracted the majority of retail investors' attention.
Currently, Reddit users are encouraging each other to buy GameStop stocks before the company announces its earnings report next week. Previously, retail investors' fascination with short-term call options led to an astonishing rebound for GameStop.
However, Goepfert warns that while trend-following retail investors are more confident that US stocks will continue to rise, "large institutional investors have started expressing some concerns."
Peter Boockvar, the author of "The Book Report," quotes the latest reading report from the American Association of Individual Investors (AAII) and writes, "Strictly from the perspective of contrarian sentiment, it is now time to be cautious in the short term." "Retail investors' optimism has reached an extreme point."