The Dow Jones closed Wednesday at 26,989.99 – just 5.4 percent below where it was at the start of the year before the coronavirus plunged the economy into a dizzying fall. The rebound caught many stock market professionals off guard amid record unemployment and falling corporate profits, including hedge fund founder Paul Tudor Jones, who said on Tuesday that he was baffled by the rally.
But in a recent note to customers, Deutsche Bank analyst Parag Thatte concluded that small investors were behind much of the recent purchase by overlaying data from the Robinhood trading app into plus general market activity. The result, he said, is that so-called smart money traders are “chasing” day traders now.
Anthony Denier, of the Webull Financial online trading platform, agrees. The volume of its platform jumped nearly 500% between February and May, with the average user turning over their wallet by around 75% per day, he said.
“It’s a perfect storm,” Denier told the Post. “We are all at home. Some people make bread and others wonder, “Hey, how can I make the purse work for me?” And with the Fed [pumping money] in the markets, they think, “How can I lose? »»
“Many new investors see this environment as an opportunity to enter the market,” added a Schwab spokesperson about brokerage usage data for April.
Wall Street insiders like to blame Robinhood, a popular trading app with millennials that has been credited with the rise of free trade. Robinhood says it has seen a 30% jump in users this year to 13 million, despite embarrassing outages at the start of the pandemic when volumes overwhelmed its servers.
“I have seen friends breaking into Robinhood or similar apps,” said a hedge fund manager. “No financial background, feeling like geniuses that they have grown so much in recent months. ”
Certainly, the mom-and-pop revolution has led to strange business patterns, including a 1,250% increase in a little-known Chinese online real estate company on Tuesday. The reason given on social media was its name, FANGDD Network, which resembles the FANG code for tech giants Facebook, Amazon, Netflix and Google.
Dave Portnoy, the millionaire founder of Barstool Sports, also participated in the day in the absence of sport and posted videos full of comments on his wins and losses.
“I am the new breed. I’m the new generation, “Portnoy boasted in a video on Monday. “No one can claim that Warren Buffett is better on the stock market than I am currently. I am better than him. It is a fact. “