Has the retail investor thrown up the white flag?
On Monday, they certainly did. According to Peng Cheng, a markets strategist at JPMorgan, retail investors aggressively dumped stocks at the beginning of the day. By noon, there was a retail order imbalance of $1.36 billion.
Retail investors sold companies including Apple AAPL, +0.83%, Nvidia NVDA, +6.36%, Netflix NFLX, +2.32%, Advanced Micro Devices AMD, +3.60%, Microsoft MSFT, +2.18% and Tesla TSLA, +1.08% — and their number-one purchase was the ProShares UltraPro Short QQQ SQQQ, -6.36%, which also is a bet against the stock market.
They then, collectively, changed their minds. Retail investors bought close to $1.3 billion in stocks between 12:30 p.m. and 4 p.m. Still, on the day, the retail order imbalance ended at -$252 million.
By contrast, what Cheng classifies as non-retail investors — i.e. the likes of hedge funds and mutual funds — were net buyers of $5.8 billion.
Viraj Patel, currency and global market strategist at Vanda Research, said it’s too early to say the retail investor has completely capitulated. “Whilst we’ve seen buying fatigue, retail hasn’t capitulated yet in a way that would mark the equity bottom,” he tweeted.
Over on the Reddit Wall Street Bets forum, there was gallows humor. One post had a meme of a Wendy’s fast-food chain, with the tagline, “Welcome back to work, Diamond Hands.” Diamond Hands is the internet slang for an investor who refrains from selling.
Futures on the Dow Jones Industrial Average ES00, +0.06% slipped Tuesday morning in another volatile session.
If a rate-hike cycle is the proverbial removal of the punchbowl, it looks like retail investors might be leaving the party on the eve of Wednesday’s Federal Open Market Committee decision.
Dutch pension PGGM cut investments in Apple, Intel, and Qualcomm in the fourth quarter, and started a position in Nvidia.
Steven Goldstein is based in London and responsible for MarketWatch’s coverage of financial markets in Europe, with a particular focus on global macro and commodities. Previously, he was Washington bureau chief, directing MarketWatch’s economic, political and regulatory coverage. Follow Steve on Twitter: @MKTWgoldstein.