Retail Traders Dominate The Market For Now

There are a lot of storylines this year in markets. One of the most interesting is how well retail traders with no experience have done. As you can see from the chart below, retail favorites are crushing the market and even hedge fund VIP stocks which have outperformed the market themselves. Crazy risky stock ideas which normally do horribly have made new traders a ton of money. It’s like the used car commercials that try to show anyone can buy one.

Photo by Markus Spiske on Unsplash

They say, you can buy one with bad credit or no credit because everyone gets approved. In this market, profits (made by firms) are optional if not discouraged. Even bankrupt stocks have had their day.

Low interest rates are not a justification for wild speculation. They provide the ground for extreme movements, but they don’t last. One of the more recent examples was marijuana stocks. This isn’t a new normal where speculation stays this way. There has always been wild speculation, but it never lasts. The main difference between now and the past is how easy it is to risk your life savings. You can tap your phone screen while in bed. As you can see from the chart below, bicycle stocks exploded in the late 1890s. Speculative crazes occur with each new generation. We are just in the latest one.

Early Jobless Claims

Because of the Thanksgiving holiday, jobless claims came out a day early. They ruined the holiday joy because they were bad. This is the 2nd week of rising claims which could signal the labor market is getting worse because of COVID-19. This probably won’t be a double dip recession, but the slowdown thesis is real.

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