Retail investors' appetite for U.S. stocks has fallen in the past week, data from Vanda Research showed on Wednesday, increasing the odds for a broader sell-off in the S&P 500 at a time when it is already about 2% off its record high.
In the five days to Tuesday, retail investors bought $657.7 million in U.S. equity exchange-traded funds (ETFs), compared with $989.6 million and $1.39 billion in the preceding two weeks, partly due to a surge in demand for cryptocurrencies, analysts at Vanda wrote in a client note.
The question now is, are individual retail investors beginning to weigh the risks for all of the rewards they have enjoyed in the equities markets in the past year.
"Retail investors have bought every minor dip in equities this year, shielding the S&P against a double digit sell-off [but] this diminishing appetite to support the equity rally raises the odds of a larger sell-off if institutional investors continue to sell," said Ben Onatibia, senior strategist at Vanda.
S&P 500 Down 1.8% This Month
The benchmark S&P 500 is down about 1.8% so far this month on worries about the economic hit from the Delta variant of the coronavirus and signs of a faltering economic recovery. Still, the index has doubled from its March 2020 lows and has not suffered a 10% pullback in more than a year.
In the past week, small-time traders bought up new meme stocks including Aterian Inc, IT services firm Support.com Inc and e-commerce company Vinco Ventures Inc instead of usual targets such as AMC Entertainment Holdings Inc and Clover Health Investments Corp , Onatibia said.
Shares of e-commerce company Aterian slumped 39% on Tuesday, but are still up about 54% since the close of trading on Sept. 7. Support.com and Vinco Ventures have also lost 39% and 18%, respectively, in the past five trading sessions.
© 2021 Thomson/Reuters. All rights reserved.