Retail investors are betting that Wall Street’s pessimism in the US stock market is out of place.
People have been sticking with their buying by dip this week, investing $ 4.84 billion in the market since Monday, data compiled by Vanda Research shows. In contrast, institutional traders pulled $ 28.6 billion from US equity funds in the week through Sept. 22 amid the risks of reducing the China Evergrande Group debt crisis.
The multitude of day-to-day trading remained concentrated in exchange-traded funds like SPDR S&P 500 ETF Trust and Invesco QQQ Trust Series 1, as well as tech giants like Apple Inc., Facebook Inc., and Microsoft Corp. So-called meme stocks like AMC Entertainment Holdings Inc. and Lucid Group Inc. continued to receive a bit of love from retailers using platforms like Fidelity.
In addition to buying into the overall market dips, retail traders were quick to acquire shares in DraftKings Inc. as the shares fell 7.4% on news of their decision to buy UK gambling company Entain Plc. . and Facebook Inc. on Wednesday when the company warned that Apple Inc.’s new data collection restrictions will affect digital ad sales.
“If I hold onto something for years, I would always get into FANG. Those that I believe will always rise and are the future, ”Barstool Sports Inc. founder Dave Portnoy said by phone. “People sometimes act crazy when I say stocks are only going up, but if you have a long-term view, they really are only going up.”
That optimism is not entirely out of place. The S&P 500 Index has soared more than 1,000% in the past three decades, despite massive corrections after the dot-com bubble and the 2008 financial crisis. And the S&P 500 took less than six months to recover from a slide 34% when the coronavirus shut down the world economy.
Wall Street’s argument for an impending sell-off is that the stock market is simply overheated. Strategists at Goldman Sachs Group Inc., Morgan Stanley and Citigroup Inc. have sounded the alarm in recent weeks about the expanding delta variant and actions by central banks to end stimulus programs.
That fear could create an opportunity for investors focused on the long-term, according to Callie Cox, senior investment strategist at Ally Invest.
“When the market expects the worst, it’s really hard to be disappointed,” he said by phone. “We have urged our clients to look at the headlines, but remember that 99% of the headlines do not matter to the long-term investor.”
Economist John Maynard Keyes once said, “In the long run, we will all be dead.” The motto of the retailers is a slight variation of that; “In the long run, stocks will always go up.”
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