During the pandemic, ordinary people piled into stock markets, many for the first time in their lives. Between January and September, big US retail brokerages E Trade, TD Ameritrade and Charles Schwab saw the total number of average daily trades increase by three quarters to six million, according to Sundial Capital Research.
Lockdown boredom is one explanation for this trading surge. Another is the relative lack of sports betting opportunities and the hunt for returns amid record-low interest rates.
As newcomers flooded into trading, they were drawn to one platform in particular. Robinhood, one of the most high-profile trading apps, reported three million new accounts in the first quarter of 2020. Half of these were first-time traders.
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The most recent inflation data release and the U.S. consumer price index were on investors’ minds Wednesday, as the index climbed 0.4% in December, a value in line with a Dow Jones estimate.
Stocks and index ETFs rallied strongly in the first week of the new year, but have begun consolidating since then.
“The market rally has taken a break this week,” said Mark Hackett, chief of investment research at Nationwide. He noted, however, that “sentiment and risk indicators continue to reflect investor optimism, with credit spreads at their tightest level since before the pandemic, fear & greed indicators at elevated levels, and the put/call ratio near historic lows.”
Technically speaking, the major U.S. benchmarks have asserted a near-term holding pattern, pulling in modestly from all-time highs. Still, the slight downturn punctuates previously aggressive January breakouts amid a still comfortably bullish bigger-picture backdrop.