Last year was the year of the individual investor. Like never before, they poured into the market, investing in stocks for the first time.
But this year’s GameStop frenzy has surpassed the biggest moments of 2020, convincing more people to look into buying stocks.
2020 saw a complete paradigm shift for retail investors. The commission-free trading, stimulus, the whiplashing Covid-fueled stock market, high unemployment, and lack of sports and sports betting resulted in more regular people trading than ever before. According to Bloomberg Intelligence, the first six months of 2020 saw individual investors take 19.5% of the market’s trading volume – around 4.4 percentage points higher than in 2019 and around double the volume of a decade ago.
Still, in the final week of January 2021, Google searches for “how to buy stocks” and “buy stocks” soared, according to Google Trends data. (“Buy stocks” is a little more popular.)
Between March 15 and March 21, 2020, searches for “buy stocks” were the highest ever, but they’re now surpassed by the period between Jan. 24 and 30, 2021. Google uses a scale of 0-100; last week’s score was 100, representing the most popular ever, and March had a peak of 93.
DataTrek pointed out that during last year’s trading surge, wannabe investors searched the generic first (“buy stocks”) and then later, specifically searched for “Robinhood” or other brokerage names. Last week’s searches were for “buy stocks” and “Robinhood” simultaneously. This suggests a more pointed acceleration of users who acted more quickly, which is perhaps unsurprising given that the GameStop frenzy headlines made it into mainstream news.
Initial data seems to back up the trends. According to Piper Sandler, December’s average daily trading at the biggest retail brokers topped 6.6 million per day, and in January reached 8.1 million a day.
Furthermore, Robinhood — and Reddit — topped the list of most downloaded apps in the Apple app store last week.
‘Many factors may be contributing to this uptick’
Throughout the first boom of retail investors last year, stories of lottery-like successes — more common in volatile markets — emerged. (Stories of failure are not as publicized, except on Wall Street Bets, where shooting your shot is respected.)
“Many factors may be contributing to this uptick, whether it be lower trading fees, stimulus checks, or stay-at-home orders,” RBC analysts wrote in a recent note. “Overall, investing in public equity markets in the U.S. has only been made easier.”
The bank also pointed out that lower spending and higher personal savings rates probably had an impact as well.
One interesting factor the bank found: stimulus payments came right before the recent increase in posts on WallStreetBets and increase in the number of Reddit users posting there.
While the subreddit isn’t necessarily indicative of the broader activities of retail traders, the latest viral interest GameStop has precipitated has had some effect on online searches, so while it may or may not end up being a driver of speculation, it might get more people in the market — and is, if app store downloads of Robinhood and others are any indication.
RBC even noted that cooler temperatures are associated with more activity on the Wallstreetbets subreddit.
But most of all, the next few months will provide a clearer picture of how these new investors will change the landscape of the market. If 2020’s new investors helped cause last week’s frenzy, how will last week’s new investors affect the market now?