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- Retail investors have spent a record $1.51 billion a day in the US markets over the past month, says Vanda Research.
- The S&P 500 has risen nearly 8% in 2023, and individual investors do not want to miss out on gains.
- Data suggest 'consumers retain impressive levels of buying power,' says the research firm.
Retail investors have been pouring a record amount of money into US financial markets, driving their cash toward ensuring they don't miss out on stock gains made so far in 2023, according to research firm Vanda.
Individual investors pushed $1.51 billion a day, on average, into the US markets over the past month, the most on record, the firm said Thursday. Its VandaTrack tool monitors retail investing activity more than 9,000 stocks and ETFs in the US.
Those waves of money have contributed to a continued drive in market swings since the second half of 2022.
Such swings have resulted in the S&P 500 rising 18% off the lows hit in October. Within that, the index has risen nearly 8% after last year's sharp 19% plunge.
The sway held by retail investors was on display Wednesday when the S&P 500 clawed out of the red to finish modestly higher. Vanda said total net purchases of US securities exceeded expectations by a significant margin that day.
"This type of behaviour suggests retail traders are FOMO-ing more than any sentiment recent survey would show," Marco Iachini, senior vice president of research at Vanda, said in a weekly report published Thursday. Separately, Ned Davis Research recently found that the fear-of-missing-out trade has prompted some investors to wade back into stocks.
Professional investors have been widely bearish on stocks. Meanwhile, the largely contrarian crowd of retail investors appears to be well-funded while they pick up equities.
"That's in keeping with retail sales and jobs data for January, suggesting that consumers retain impressive levels of buying power," said Iachini. "While the jury is still out on whether that's due to a robust job market or excess savings from pandemic stimulus, the bottom line is that investors should heed signals from the 'unsophisticated money' crowd."
Looking ahead, Vanda expects to start seeing a declining retail flows into cash equities. ["Seasonality] suggests that March-April are typically middle-of-the-road months during the calendar year."