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Since 1 February 2021, U.S. equity markets have collected a net $189 billion in new investment, the Financial Times reported, with a net new $28 billion in June alone, according to Vanda Research.
It was the highest monthly inflow since 2014, even topping last January’s flood of cash during the first meme-stock craze.
Last year’s economic shutdown drew a new wave of individual investors into equities, FT said, noting that analysts had expected them to withdraw once the economy began to recover.
Instead, their numbers are growing: 10 million new brokerage accounts were opened during the first half of this year, the same number opened during all of 2020, asset manager JMP Securities reported.
Much of the new capital went into industries that benefit from the economic recovery, such as energy and financial services.
Small-cap value funds took in $11 billion during the first five months of this year, more than in any such period since 2010, the Wells Fargo Investment Institute said.
The new individual players are entering the market at a time of peak valuations and as professional money managers grow increasingly uneasy about the markets’ future.
As more investors venture into the markets, “we expect the journey to be volatile as investors price the possibility of tapering and interest rate increases by the Fed,” Wells Fargo analyst Ken Johnson told the FT.
Individual investors show a 70-percent confidence level that stock prices will rise over the next three months, while professional investors rate that likelihood at just 44 percent, according to Sundial Capital Research.
However, many individuals playing the market are speculators, not investors.
During the first half of this month, speculators have made bets on obscure companies such as Alfi Inc., Ikonics Corp., and Marin Software that have doubled their share prices inside a single trading session.
Investors will commit a net new $500 billion to U.S. equity markets this year, Goldman Sachs has predicted.
TREND FORECAST: Welcome to dot.com 2.0. What the business media calls investors are nothing more than gamblers. As has long been noted, it is more than just record low interest rates, rising vaccination rates, and expectations of a surging economy led by strong consumer spending that’s attracting the market players… It’s a dot.com/rookie gambler’s mentality disconnected to human reality that keeps driving markets higher.
The “Bigs” will keep doing all they can to drive equities higher. Thus, the higher stock prices rise, the more rookie betters will play the market game. When the “Bigs” see new market player numbers stagnating and/or slumping they will bail out, go short and sink equities into bear market territory.