Strong bearish buying momentum from retail investors will help keep stocks strong in 2021, says TD Ameritrade’s JJ Kinahan
- The strong bearish buying momentum from retail investors should help support stocks over the next few months, JJ Kinahan said.
- The TD Ameritrade strategist said uncertainty about inflation and the Fed should bring volatility, however.
- Retail investors have benefited from recent declines largely by buying ETFs, analysts said.
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Retail investors are eagerly buying the downside and this is supporting US stocks despite economic and monetary policy uncertainty, TD Ameritrade senior strategist JJ Kinahan said.
“Anytime you see stocks go down 3% or less, you see people coming out very quickly to buy things,” he told Insider this week.
Kinahan said he believes the downward buying momentum will continue. And he said he doubted there would be any sharp declines in US stocks this year.
But he said the uncertainty surrounding inflation and when the Federal Reserve will reduce its support for the economy will increase volatility in US stocks in the months to come.
Kinahan likened the persistent buying by investors to American football tactics. “If you’re playing a game that works, you don’t stop doing it until the other team stops it. Right now buy the dive, no one has stopped it.”
TD Ameritrade is one of the world’s largest electronic brokers, with over $ 1,000 billion in accounts receivable.
The S&P 500, the US benchmark stock index, has steadily hit record highs despite periodic massive sell-offs. For example, stocks fell about 2.5% over two days in mid-July, only to rise 3.7% over the next five days.
On one of the days when stocks fell in mid-July, retail investors bought a record $ 2.18 billion in stocks, according to data firm VandaTrack.
Amateur traders have taken hold of exchange-traded funds like State Street’s SPY, which tracks the S&P 500, or Invesco’s QQQ, which tracks the Nasdaq 100.
JPMorgan said in a note in late July that retail investors also bought lower Chinese stocks, which fell after Beijing’s crackdown on large companies.
Nikolaos Panigirtzoglou, a market strategist at JPMorgan, said retail investors have also been drawn to ETFs as a way to gain exposure to cheaper Chinese stocks.
However, Viraj Patel, a strategist at Vanda, said retail investment could now slow due to the expiration of unemployment benefits in the United States and the fact that Americans have the option to go out and spend on it. other things to the reopening of the economy.
Kinahan said the reopening should stimulate the economy and thus support US stocks over the coming months.