As the S&P 500 continued its upward surge this year, surpassing a 20% increase year-to-date, retail traders have shown a penchant for adaptability and change in their stock preferences.
A Shift in Stock Favoritism: TSLA to NVDA
Previously, retail investors favored Tesla (TSLA) as their go-to stock, but the tides have turned. In 2024, the spotlight has shifted to Nvidia (NVDA), with daily trades exceeding $4 billion and net purchases reaching close to $13 billion.
Chart 1: The Noteworthy Rise of Retail Interest in NVDA as Market Momentum Grows
Navigating Concentration and Diversification
While retail traders often have a “favorite stock,” their portfolio remains diversified. For instance:
- NVDA accounted for just 13.4% of total retail trades this year and was the most popular stock on 64% of trading days.
- In 2020, Tesla held the crown as the top-traded stock, commanding nearly 30% of all trades in February 2023.
Tesla boasts multiple records as the most-traded retail stock, spending a significant 678 days in that position since 2019, closely followed by Apple (AAPL) in second place.
Chart 2: Pulsating Popularity of Retail Stocks Over the Past Half-Decade
Markedly, retail investors have predominantly been net buyers of company stocks in 2024, contributing around $32 billion to the total net buying spree. Their inclination towards net purchases intensified post-June, coinciding with the prospects of Fed rate cuts.
Retail Preference for ETFs Endures
Contrastingly, retail investors exhibit a consistent pattern of net-buying ETFs almost daily, amounting to $120 billion in ETF acquisitions this year.
Chart 3: Robust Retail Appetite Across Various Investment Channels
ETF Inclination: A New Bonding Trend
Primed by the prospect of delayed rate cuts in late 2023, retail investors have increasingly turned towards purchasing a broad spectrum of bond ETFs, funneling nearly $26 billion into these avenues and bolstering their holdings amidst falling short-term rates.
Chart 4: Retail Embrace of Fixed-Income ETPs Reaches its Zenith Post Fed Rate Hikes
Retail Trading: Scaling Heights Beyond Pre-Covid Metrics
The market-wide trading volume continues to soar, eclipsing the $600 billion mark daily, partly fueled by the ongoing market surge. However, a deeper examination reveals:
- Retail trading constitutes approximately 6.5% of the market-wide trades, amounting to a daily average of $38 billion.
- Retail trading represents a higher share of share volumes, peaking at 9%, given their affinity for lower-priced stocks.
Interestingly, the post-2020 period witnessed a dip in trade value to pre-Covid levels. Nonetheless, a resurgence occurred subsequently, with shares traded hitting a peak during the meme stock frenzy of 2021 and gradually tapering since.
Chart 5: Retail Market Activity Continues to Outshine Pre-Pandemic Metrics
The Lifeline of Retail Liquidity Continues Unabated
Despite indications that many households have dispensed their Covid-era savings, retail trading in stocks and ETFs remains a significant artery of liquidity in the market.
Thus, the ebb and flow of retail involvement persist in steering the course of various investment avenues, underscoring their pivotal role in maintaining market vibrancy and momentum.
