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The pandemic spiked an economic downturn that lowered interest rates, thus pushing retail investors to seek refuge in terms of potential gains in the stock markets.
The stock market and general trading activity are still at high levels following the retail invasion of the online brokerage platforms during the short-squeeze saga of GameStop Corp (NYSE: GME). As reported by CNBC, the trading platforms continue to see increased app downloads in February at levels higher than that recorded in the year-ago period according to JMP Securities using SimilarWeb app download data.
Per the data, Robinhood, the buying and selling application most common among millennials saw about 2.1 million downloads in the previous month, a figure 55% more than what was recorded in the year-ago period. The total downloads dropped from the 3.6 million seen in January, but it shows to a large extent that new retail investors are still coming into the mainstream market.
“App download activity that began 2021 with tremendous momentum, surging during the days of the Reddit/social media short squeezes, but has still remained well above average, even as the news cycle and traders’ attention changed,” JMP analyst Devin Ryan said in a note addressing clients.
While the Robinhood app saw the most downloads, cryptocurrency exchange Coinbase also saw a spike in downloads cresting above 1.5 million, up 184% from the year-ago period. This particular data reveals that the embrace of traditional investment assets is in a way correlated with digital currencies. Other brokerage entities including TD Ameritrade, Webull, and Sofi amongst others also saw significant app download activity in February.
The sustainability of this trend is however looking too ambitious to be sustained but Ryan begs to differ.
“We do think new app downloads and account activity will remain above pre-pandemic levels and the baseline for trading activity has moved permanently higher following the record number of new customers into the industry,” he said.
Stock Market Invasion to Receive Boosts with Stimulus Cheques
Per the CNBC report, many factors have been highlighted, suggesting the reasons why retail investors are making their entry into the stock market in their numbers. One of these is the COVID-19 pandemic, which caused the stay-at-home exercise, and the efforts by the government to issue out stimulus cheques.
The pandemic spiked an economic downturn that lowered interest rates, thus pushing retail investors to seek refuge in terms of potential gains on investment in the stock markets, and by extension, the crypto space. Experts have confirmed that this class of traders is getting it right, with strategies bordering on buying the dips and selling high.
The United States Senate has passed a new $1.9 trillion stimulus bill, and Congress gave its affirmation on Wednesday, despite planned delay efforts from Republican Rep Marjorie Taylor. With the humongous bill successfully passed, there will be new money flow into the hands of the small capital investors, and from the precedence described, seeing new fund inflow into the brokerage apps will not come as a surprise.
The influence of the retail traders is no longer negligible, a positive ticker confirmed by Randy Frederick, vice president of trading and derivatives at Charles Schwab, who noted that “The retail traders are becoming a much larger and larger component of overall volume.”