Retail Traders Have Lost That Stimmy Feelin'

Last Friday, when previewing the month and quarter-end rebalance, Nomura's Charlie McElligott went on a brief tangent, showing the collapse in marketwide call volumes as the retail frenzy has decidedly cooled off in recent weeks...

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... which McElligott attributed to three factors:

  • The weight of not just the overall “stalling-out” in the broad Equities tape again — but particularly, many of these most popular speculative names meaningfully lower over the past few months and bleeding PNL, particularly in YOLO Retail trading accounts
  • Retail selling ahead of tax bills coming-due, particularly with an anticipated hike in the capital gains tax from the Biden administration looking like an inevitability
  • And perhaps the most salient point with a “totally-sane” macro rationale, being that as JPM found last week, the latest round of “stimmy checks” are being re-routed away from speculative assets (which were previously obsessed over during the “Work From Home” screen-time era), but now instead are transitioning back into the real world consumer economy, as we re-open and get back to work in the post-Vaccine paradigm shift

Whatever the reason, but the sudden drop off in retail participation - which as we discussed last week has also manifested itself in more QQQ put buying as even "unsophisticated" investors are now hedging their downside - has become a significant source of market tensions across other banks as well, with Deutsche Bank's flow strategist Parag Thatte also noting that after call volumes had been rising sharply for over a year, especially since November, "they soared further mid-January, but then fell sharply right after the steep climb and subsequent sell-off in heavily shorted stocks in late January. Volumes then rose briefly but have been declining again since the middle of February."

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