It takes time to accurately identify the weight a certain event has in history; you need the perspective that years -or decades-provide. But today we will take a chance, and say with conviction that the shift in the landscape of retail investing is permanent and it will continue to expand. Taking a look at Google Trends, which tracks keyword search interest, we notice that there’s a direct correlation to what we experienced in the markets. We may have seen a peak in January 2021, but the investment revolution for the masses started long ago. According to Citadel, the volume of transactions attributable to retail has doubled since 2019, even reaching an impressive 25% on peak days.
How did this happen? Robinhood may be the breakout name but there’s a seemingly never-ending number of apps that appealed directly to retail investors, such as eToro, Spaceship, Raiz, Coinbase, offering low or no-fee transactions, educational tools to bridge the gap in financial literacy (even a “copy trade” function), and access to international markets, crypto and other currencies, options, CFDs, and other financial instruments. Traditional brokerages have also joined the fry to offer alternatives.
This is what happens when you combine social media, a desire to acquire wealth as quickly as possible, and access to these easy-to-use tools. Today we can see hoards of profiles, groups, and conversations on Reddit, Twitter, Instagram, Facebook, and YouTube channels run by “normal people”, talking about investment and attracting an audience, which shows that there are eyeballs on the topic, eager to participate in the markets. Many of these -not all, of course- are actually doing consistent and decent research. We believe deeply that financial literacy is key to progress, so this can be inspiring to watch.
Why is this recent surge different? Because these users identified a real weakness -a stock being 140% short, in the case of GameStop, and similar for AMC and other “meme stocks”-, which created an opportunity that required patience. Keith Gill (AKA Roaring Kitty & DFV) became inadvertently the leader of an aspirational movement that appeals to so many, as it appears to democratise what’s been reserved for a select few.
Will short-sellers disappear, and be the main casualty of this moment? Or will restrictions be imposed on opinions on financial assets shared on social media? Who knows. But what we are sure of, there is no backing down.
Retail is proudly here to stay. Ignore at your own peril.
And that is it for today. We’d love to hear your thoughts. Reach out on our social media channels to chat, and also find additional resources here. See you next week!
The Weekly by Synergy: 5-minute musings on the markets, current trends, and events. From our opinions, observations, analysis, and news commentary, just a few lines to get you started every week.
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