Forward-looking data show retail investors are thinking they’re ngmi.
The influence of finance TikTokers and r/wallstreetbets goblins telling you to “buy the dip” might be stronger than I expected, based on data reported by VandaTrack this week.
As the bulge brackets sounded the alarm about an impending recession, U.S. individual investors maintained roughly the same clip of stock purchasing since March 2020, spending about $24 billion over the past month. But forward-looking data show retail investors are thinking they’re ngmi.
As of last month, the average U.S. retail investor had a shockingly aggressive portfolio made up of 67% stocks, 14% bonds, and 19% cash, according to the American Association of Institutional investors. That asset allocation has become only slightly more bond- and cash-heavy over the past few months, a sign that investors are bracing for more market headwinds.
The optimism among armchair investors could have something to do with the $2.8 trillion in excess savings that American households hoarded during the pandemic. But as those savings dry up, so could the gushing flow of money into equities. Add dismal consumer sentiment and a crypto crisis, and we could see investors slow down on equity spending to bulwark their net worth.
Read more in the Wall Street Journal story.