Retail investors are spending a record $1.5 billion a day on equities as the 2023 rally triggers FOMO.

  • Over the past month, retail investors have spent a record $1.51 billion a day in US markets, according to Vanda Research.
  • The S&P 500 is up nearly 8% in 2023 and private investors don’t want to miss out on gains.
  • The data suggests that “consumers maintain an impressive level of purchasing power,” the research firm said in a statement.

According to research firm Vanda, retail investors are pouring record amounts of money into U.S. financial markets, channeling their money to capitalize on stock gains achieved by 2023.

Individual investors have, on average, poured $1.51 billion a day into U.S. markets over the past month, a record high, the firm said on Thursday. Its VandaTrack tool tracks the retail investment activity of more than 9,000 US stocks and ETFs.

These waves of money have contributed to the continuation of market fluctuations from the second half of 2022.

Such fluctuations sent the S&P 500 up 18% from its October lows. At the same time, the index rose by almost 8% after last year’s sharp fall of 19%.

The influence of retail investors was shown on Wednesday when the S&P 500 broke out of the red zone and rose slightly. Wanda said that the day’s total net purchases of US securities were well above expectations.

“This type of behavior suggests retail traders are more FOMO than any recent sentiment poll,” Marco Iacini, senior vice president of research at Vanda, said in a weekly report released Thursday. Separately, research by Ned Davis recently found that the fear of missing out on a deal has spurred some investors back into equities.

Professional investors were bearish on stocks. Meanwhile, the largely contentious mob of retail investors appears to be well-funded as long as they buy shares.

“This is consistent with the retail sales and employment data for January, suggesting that consumers maintain an impressive level of purchasing power,” Yachini said. “While no decision has yet been made as to whether this is due to a robust labor market or excess savings due to pandemic stimulus, the bottom line is that investors should heed the signals of the “unsophisticated money” crowd.

Looking ahead, Wanda expects retail cash flows to start declining. [“Seasonality] suggests that March-April are usually intermediate months within the calendar year.”

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