Americans are all in the stock market.
Individual investors have more stocks than ever before as major indices rise to new heights. They also raise the ante by borrowing to enlarge their bets or increasingly buying on small dips in the market.
The stock of US households rose to 41% of their total financial assets in April, the highest level recorded. It is according to JPMorgan Chase & Co. and Federal Reserve data dating back to 1952, which includes 401 (k) pension accounts. JPMorgan’s Nikolaos Panigirtzoglou, who analyzed the data, attributes the increased allocations to appreciating stock prices along with stock purchases.
Enthusiasm for equities comes as market volatility has been lower and the S&P 500 has hit 25 records this year, driven by a stellar earnings season and the prospect of an economic recovery that is faster than many predicted. Meanwhile, stimulus control has driven a record increase in household incomes, increasing spending and helping accelerate the recovery.
In the coming week, they will report monthly job reports and earnings results from companies like Uber Technologies Inc.
will provide clues as to the strength of the recovery.
Millions of new brokerage accounts were set up during the Covid-1
The ever-growing market – recently lifted by impressive earnings from companies like Facebook Inc.
and the alphabet Inc.
—Has attracted even more investors in. Retail customers of Bank of America Corp.
have been buying stocks for nine weeks in a row, while hedge funds and other large investors have recently fled the stock market, analysts at the bank said in a note from April 27.
Damon White, a 44-year-old medical assistant based in Sewell, NJ, said he began learning about stocks and options through social media platforms like TikTok while being fired from his job last year.
He is back at work, but says he still often checks in on his investments and recently pours thousands more into the market, especially in stocks like Apple, Tesla Inc.
and American Airlines Group Inc.,
brings his total holdings to more than $ 400,000.
“It was nerve-wracking when you deposited a significant amount,” White said. But “if you have a quick finger, you sell … and you lose it in the long run.”
He has no bonds and plans to continue investing in stocks.
Many individual investors have not been deterred by the market swimmer. Data from research firm Vanda Research shows that individual investors tend to buy more shares when the S&P 500 has fallen 1% on the day than when it is up by the same amount, and that their decision to buy during a sale has been strengthened during the pandemic. Some have even borrowed to bolster their stock market efforts.
David Sadkin, a partner at Bel Air Investment Advisors, which oversees $ 4.6 billion for wealthy clients, said the share of their money sitting in the stock market has risen to approx. 65% from approx. 45% last year while reducing investment. in bonds. As his bond holdings mature, he has gradually reinvested the money in stocks.
The interest on the 10-year central government debt tax is settled at 1,632% on Friday, up from approx. 0.915% where it started the year, but still historically a low level.
“To achieve our customers’ goals, we need to take greater risks,” Sadkin said. “We intend to continue to redistribute to risk premiums while keeping interest rates so low.”
Other investors have been even more aggressive. A study by the American Association of Individual Investors showed that investors’ allocation to the stock market reached a three-year high of 70% in March. And marginal debt – or money borrowed by investors to buy securities – was on record in March, figures from the Financial Industry Regulatory Authority show.
Randy Lee, a 31-year-old software engineer based in Lansing, Mich., Said he was initially attracted to the rapid excitement of options trading, witnessing his small investments roughly double or triple within hours.
Now he says he still plays in the options market, but also has “boring” stocks like Royal Caribbean Group and Kraft Heinz Co.
Shaken by the uncertainty of the pandemic, he also began to hide more money in his retirement account. He doubled his contributions every two weeks to the account and opened a Roth IRA account, which he has added to in recent weeks. Most of his shares are in the stock market.
“I’m just never had so much time to just sit at home and look at these things,” said Mr. Lee. “What better place to make money like everyone else than to start playing in the stock market.”
SHARE YOUR THOUGHTS
How has your strategy changed (if at all) during this period of stock market difficulties? Join the conversation below.
He is optimistic about equities, especially after seeing the technical behemoths report record profits last week. But he worries about a market crash in the future and has bought some cryptocurrencies that he sees as a hedge against a downturn.
He’s not alone – rising prices for everything from lumber to dogecoin to equities have sparked concerns about a market bubble. And for some analysts, the surface around the stock market is flashing a warning sign.
“Retail investors have made a lot of money on many things including stocks over the last year. At some point, given how high their capital distribution is, the risk is that they decide to go out and make a profit, ”said Panigirtzoglou, CEO of JPMorgan. “That’s actually what happened before 2000.”
Write to Gunjan Banerji at Gunjan.Banerji@wsj.com
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8