By Jamie McGeever
ORLANDO, Fla., May 12 (Reuters) – It’s almost a cliché that retail investors are always late for the investment boom, but the huge exposure of home savers to the frothyest elements of frantic markets since the blockade means they are feeling the blow of this fall. more than most.
A series of surveys and snapshots of the investment flow show that retail investors have significantly increased their technological and cryptocurrency stocks, which are now more than ever.
After marching to the top of the hill first on the ascent, it is the markets that fall fastest on the descent.
According to Vanda Research, nine of the top 10 stocks in a weighted average portfolio of retail investors are technology listed in the United States and account for more than 50% of the entire portfolio. The portfolio is deep out of the money, 31% less since its peak in December.
The wildest world of cryptography may not be the natural habitat of retail investors, but they are exploring it. A Charles Schwab survey in the UK in March showed that 57% of new investors own cryptocurrencies, and a Morgan Stanley poll published this week showed that 31% of EU retail investors owned cryptocurrencies.
Carrying on technology and crypto was probably a better bet when the Federal Reserve and other central banks were pumping the world full of liquidity, interest rates were close to zero, and governments were sending stimulus checks.
But that is no longer the case. The global liquidity leak is underway, the Nasdaq is down 30% since its November peak and bitcoin is down 60%.
Eben Burr, president of Toews Asset Management, says retail investors want to buy yesterday, but the closest they can get is to buy what went well yesterday. And that is illogical and irrational.
“There is more pain ahead in the short term, 100%. If the market decline continues, it will be too painful and retail investors will come out,” said Eben Burr, president of Toews Asset Management. “Everyone has a breaking point.”
“Can’t get lost”?
Institutional investors now control the lion’s share of the bitcoin and cryptocurrency universe, but the nominal holdings of retail investors remain higher than ever and rising.
The Morgan Stanley survey showed that 16% of EU retail investor holdings are in cryptocurrencies, rather than in rents (14%), bonds (10%) and commodities (8%).
A survey conducted last month by retail investment platform eToro showed that one in three retail investors plan to invest in crypto over the next 12 months, up from 18% in October. Even baby boomers are on board: 11 percent of those over 55 plan to invest in crypto next year.
Somehow, this should come as no small surprise, given the amount of cryptography that has been etched in the public consciousness.
Hollywood star Matt Damon led a commercial for crypto.com trading app titled “Fortune Favors The Brave” in October. And just this week, as cryptocurrencies fell and many stable currencies “broke money”, former English footballer Michael Owen tweeted that his new non-fungible tokens (NFTs) “will be the first to lose their original value”.
U.S. Sen. Elizabeth Warren last week wrote to the Fidelity Pension Fund questioning the “appropriateness” of her decision to add bitcoins to her 401 (k) retirement plan options due to the “significant risks of fraud, theft and loss” of the crypto .
The current market turmoil has made these concerns clear. Blockchain analytics company Glassnode said Monday that bitcoin at $ 33,600 puts 40% of investors exposed to bitcoins underwater.
Meanwhile, Morgan Stanley’s Sheena Shah points out that everyone who bought bitcoins over the past year is in the red when trading below $ 28,000. It fell to $ 25,400 on Thursday.
“Mom and pop” investors may not be able to hold out much longer. U.S. household debt rose $ 266 billion in the first quarter to $ 15.84 trillion. It is $ 1.7 trillion more than at the end of 2019, before the pandemic.
Meanwhile, the excess household savings accumulated during the blockade while government stimulus controls are rapidly disappearing. The U.S. personal savings rate fell to 6.2% in the first quarter, the lowest since 2013.
But cryptography enthusiasts like Anthony Scaramucci, founder and managing partner of SkyBridge, see it differently. Compare current volatility with the early days of Amazon stocks, which had several major declines in its first decade of existence.
“Investors should be willing to bear it. Everyone says they are long-term investors until they see short-term losses,” President Trump’s former communications director told Reuters.
Cryptographic warnings call for the fall of US subprime, 2008 and all (Reuters, May 5)
Fed fingers crossed for 1994 repeat while hiking trail shortened (Reuters, May 5)
The rise of the dollar make up the decline in global liquidity (Reuters, April 22)
(The views expressed here are those of the author, a Reuters columnist).
(By Jamie McGeever; Additional contributions by Medha Singh in Bangalore; Edited by Andrea Ricci)