AAlthough the economy still appears to be slowing down, the stock market is already starting to show an uptrend. That may be because inflation is now falling, and the Fed’s interest rate hikes may be over — or at least close to it. This removes the constraint caused by higher rates for stocks in 2022 and allows investors to focus on the growth potential of each company or sector.
As we update our retail trading charts with insights nasdaq data link, we see that retail activity remains strong, but the retail sector has become more bearish despite the rally in stocks. In fact, bond ETFs have become one of the largest net buyers by retail investors.
gross retail trade up
Despite the economic slowdown, we see retail activity levels (green zones) holding up. Although trade value is off the high of February, which exceeded $50 billion on its biggest day, trade is still consistently over $30 billion and averaged $32 billion per day in April.
At the same time, market-wide liquidity (blue line, right axis) remains well below 2022 levels – despite trade nearing $1 trillion after the US regional banking crisis unfolded.
Chart 1: Gross retail trade (market-wide trade in blue, right axis)
Despite the boom in the market, the retail business of the companies remained negative.
Looking at net inflows to corporate stocks, we see that retail selling started positively, as stocks rallied in January. But those inflows have since reversed.
Although stocks have improved, with the Nasdaq index up 17.6% YTD, retailing has returned to stocks — especially tech and consumer discretionary stocks — with all sectors up for sale.
Chart 2: Net stock flows by month and sector (line shows SPY value)
However, retail overall remains a net buyer due to inflows into ETFs (yellow and pink in Chart 3).
In addition, the data shows a significant increase in retail purchases of bond ETFs, especially as yields on bonds rise as the Fed raises short-term rates.
Chart 3: Retail buying of ETFs offset selling of stocks
Which stocks are hot?
In the table below, we can see which stocks retail investors pay the most attention to.
SPY, AAPL and TSLA are always among the top stocks in the gross trade. Looking at net trading is also a bit misleading, as larger stocks and ETFs tend to see a greater diversity of buyers and sellers (and less net directionality).
In the list below, we look at each stock based on a mix of retail activity metrics, including gross sales, net purchases, and retail market share. We combine option interest, price returns and volume spikes to show stocks with news to drive their activity. The heatmap shows what data contributed to each stock’s combined score. Importantly, the list rewards both positive and negative performance, and the activity measured is not meant to predict future performance.
When we look at our list, we see that:
- Banks, which were very active, are now out of our list. Their volume spike and returns were strongest in the early weeks of the banking crisis.
- They have been replaced by a number of AI and emerging technology companies, with a table showing individual investor interest in tickers such as AI, BBAI, and SOUN. Chegg, an unfortunate byproduct of mainstreaming AI, also appeared in the rankings after issuing guidance during its last earnings call that generative AI would cause headwinds for its business.
- Renewable energy remains a major retail theme. Three EV companies (NIO, PLUG, CHPT) and one solar company (ENPH) feature in the top 20 names in the list.
- Other technology-influenced stocks like rideshare (UBER) and semiconductors (SMCI) also appear to be beneficiaries of the attention AI has received.
- Only one ETF makes this list — MJ — thanks to a high retail share and relatively large growth in volume.
Table 1: Top 20 securities for retail investors (April till date)
Which ETFs Are Hot?
Using a similar methodology, we also created a list to show what ETFs are attracting investors.
Note that this list includes All Uses market participants (not just retail) and creation and redemption data (rather than pure retail buying and selling). This multifactor scoring ensures that SPY (the most liquid stock in the world) doesn’t rank #1 all the time. Similar to the top stock list, the ETF list rewards both positive and negative performance, and the activity measured is not meant to predict future performance.
Here’s what’s on our Top 20 list since the beginning of April:
- Sector funds had the largest net inflows – Semiconductor (SMH), Communications (XLC) and Consumer Staples (XLP) all had net creation in excess of $1 billion.
- Trading in regional banks can be seen here, with KRE and FTXO both making the list with negative flows and returns. However, the KRE volume has decreased by 11% since the beginning of April as compared to the previous period.
- With a selloff in oil markets on the back of fears of an economic recession, our top-20 ETFs feature a handful of energy names — ranging from oil and natural gas commodities to energy sector funds.
- There are also a handful of European country ETFs, all with outflows, that made the list.
Table 2: Top 20 ETFs for Investors (April to Date)
Retail continues to add liquidity to US markets and assets to US ETFs
Despite challenges in the economy and the growing debt ceiling debate, retail remains active in the US stock market. It continues to contribute significant liquidity to US ETFs across a range of stocks and assets.