https://oltnews.com/americans-cant-get-enough-of-the-stock-market-the-wall-street-journal
Americans can’t get enough of the stock market – The Wall Street Journal
2 days ago
Americans are all in the stock market.
Individual investors are holding more stocks than ever as major indexes reach new highs. They also increase the stake by borrowing to amplify their bets or by buying more and more on small dips in the market.
US household inventories rose to 41% of their total financial assets in April, the highest level on record. This is according to data from JPMorgan Chase & Co. and the Federal Reserve going back to 1952 which includes 401 (k) retirement accounts. JPMorgan’s Nikolaos Panigirtzoglou, who analyzed the data, attributes the high allocations to the appreciation in stock prices alongside stock purchases.
The enthusiasm for equities comes as market volatility has eased slightly and the S&P 500 has hit 25 all-time highs this year, fueled by a stellar earnings season and the prospect of an economic recovery faster than many believe. had planned. Meanwhile, stimulus controls fueled a record increase in household income, boosting spending and helping propel the recovery.
In the coming week, the monthly jobs and earnings report for companies like Uber Technologies Inc.
will provide clues to the strength of the recovery.
Millions of new brokerage accounts were created during the Covid-19 pandemic and some investors who first dabbled in stock or options trading in the past year have stuck around , adding to their investments. Financial advisers and fund managers said their clients became more comfortable owning stocks when they witnessed the powerful rally of the past year, with some even wondering why they needed bonds in the past. their portfolios with consistently low returns.
The ever-growing market, recently bolstered by impressive profits from companies like Facebook Inc.
and alphabet Inc.
—At attracted even more investors. Bank of America retail customers Corp.
bought stocks for nine straight weeks, while hedge funds and other large investors recently fled the stock market, analysts at the bank said in an April 27 note.
Damon White, a 44-year-old medical assistant based in Sewell, NJ, said he started learning about stocks and options through social media platforms like TikTok while on leave last year .
Damon White recently invested money in stocks like Tesla and American Airlines.
Photo:
Damon white
He’s back to work but says he still checks his investments frequently, recently pouring thousands more into the market, especially stocks like Apple, Tesla. Inc.
and American Airlines Group Inc.,
bringing its total inventory to over $ 400,000.
“It was scary when you put in a substantial amount of money,” White said. But, “if you have a quick finger, you will sell … and you will lose in the long run.”
He does not hold any bonds and plans to continue investing money in stocks.
Many individual investors were not deterred by the market downturns. Data from research firm Vanda Research shows that individual investors tend to buy more stocks when the S&P 500 drops 1% on the day it rises by the same amount, and their determination to buy during sales s’ is reinforced during the pandemic. Some have even borrowed to boost their stock market bets.
David Sadkin, a partner at Bel Air Investment Advisors who oversees $ 4.6 billion for high net worth clients, said the share of their money that is in the stock market has grown to around 65% from around 45% a year. last, while he reduced investments. in bonds. As his bonds mature, he gradually reinvests the money in stocks.
The yield on the 10-year Treasury bill stood at 1.632% on Friday, down from around 0.915% where it started the year, but still at an all-time low.
“In order to achieve our clients’ goals, we need to take more risks,” Sadkin said. “We intend to continue to reallocate into risky assets as long as interest rates remain this low.”
Other investors have been even more aggressive. A survey by the American Association of Individuals Investors showed investor allocations to the stock market peaked at around three years of 70% in March. And margin debt – or the money investors borrow to buy securities – hit a record high in March, according to figures from the Financial Sector Regulatory Authority.
Randy Lee, a 31-year-old software engineer based in Lansing, Mich., Said he was initially drawn to the rapid thrills of options trading, seeing his small investments double or triple within hours.
Now he says he’s still playing the options market, but also owns “boring” stocks like Royal Caribbean Group and Kraft Heinz. Co.
Randy Lee says he doubled the contributions to his retirement account.
Photo:
Randy Lee
Shaken by the uncertainty of the pandemic, he has also started putting more money into his retirement account. He doubled his bi-weekly contributions to the account and opened a Roth IRA account, to which he added in recent weeks. Most of his holdings are on the stock market.
“I’ve never had so much time to sit at home and watch this stuff,” Mr. Lee said. “What better place to make money like everyone else than to start playing the stock market.”
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He is bullish on stocks, especially after seeing tech giants report record profits last week. But he’s worried about a future stock market crash and has bought cryptocurrencies, which he sees as a hedge against a downturn.
He’s not the only one – the rise in prices of everything from lumber to dogecoin to stocks has sparked concerns about a market bubble. And for some analysts, the exuberance surrounding the stock market is a red flag.
“Retail investors have made a lot of money in many areas, including stocks, over the past year. At some point, given the level of their equity allocation, the risk is that they decide to exit and take a profit, ”said Mr. Panigirtzoglou, Managing Director of JPMorgan. “This is indeed what happened before in 2000.”
Write to Gunjan Banerji at
Gunjan.Banerji@wsj.com
