Individual investors have been buying shares at the fastest pace on record as US equity markets have rallied higher at the start of the year.
Over the past month, retail investors funneled an average of $1.51 billion each day into US stocks, the highest amount ever recorded, according to data from research firm VandaTrack released Thursday.
“Given recent surveys show the institutional investor community remains broadly bearish on equities, it would be unwise to underestimate the importance of the retail cohort,” VandaTrack strategists said in a note. “That’s in line with retail sales and employment data for January, suggesting that consumers retain impressive levels of purchasing power.”
Tesla (TSLA) remained the favorite among this group, with retail entries into the stock totaling $9.7 billion year-to-date.
Those allocations come during a comeback rally for the EV giant after closing out its worst year on record in 2022. Tesla shares have gained 74% in 2023 through Wednesday’s close.
The SPDR S&P 500 ETF Trust (SPY), an ETF that tracks the benchmark S&P 500 index, has been the second most popular buy by retail investors this year, with retail flows totaling $3.6 billion in 2023. The index has up 8.2% year-over-year. date until Wednesday.
Amazon (AMZN), Apple (AAPL) and Nvidia (NVDA) rounded out the top five, receiving $1.8 billion, $1.7 billion and $1.4 billion in inflows this year, respectively. These names are up 20%, 19.5% and 55.8% this year in that order.
The most speculative and battered names have also been popular buys, with investors again circling baskets of stocks favored by ARK Invest’s Cathie Wood.
Wood’s flagship ARK Innovation ETF (ARKK), a benchmark for high-flying tech stocks, has seen a modest rise in inflows this year, but ranked 27th on a list of the biggest buys by retail investors bringing in $169 million for the fund.
However, retail investors captured key underlying names from ARK’s family of ETFs (Coinbase (COIN), Block (SQ), Roku (ROKU), for example) faster than the company itself, a phenomenon that has been saw at the beginning of the COVID pandemic.
“It was common in 2020-2021 for retail investors to buy ARK ETFs while also stocking up on some of its most highly publicized underlyings,” the VandaTrack team said. “While we don’t expect retail speculation to reach those levels, it should be noted that retail investors are vastly outpacing Cathie Wood and Co. in buying some of these names.”
ARK Innovation is up 38.3% year to date through Wednesday.
“Increasing flows of retail investors support outperformance of their favorite stocks,” VandaTrack researchers said, adding that retail flows have accounted for an $18.5 billion capital injection into these names in 2023.
“If the positive momentum in the broad equity market persists, it could push retail investors towards more speculative names, which are more susceptible to such flows given their smaller market capitalization.”
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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