More evidence retail investors have raced into the post-COVID market rally

A key question arising from the post-COVID rally is how much the market resilience has been propped up by an influx of retail traders taking advantage of the volatility.

And the latest data insights from trading and investment platform Investing.com lend weight to the argument that retail investors have played a role.

It follows other indicators such as increased volumes reported through millennial-focused trading apps such as Robinhood. Two domestic platforms — Stake and Marketech — also told Stockhead recently that they’d seen a sharp pickup in market activity through the crisis.

Analysing traffic from its own site, Investing.com said the number of Australian-based users rose from 420,000 in February to more than 800,000 through March and April, where they stayed into the end of the June quarter.

Investing.com analyst Jesse Cohen offered some pretty direct commentary in terms of where that interest was coming from.

‘Bored sports bettors’ turned day-traders

“Essentially bored sports bettors shifted their focus to day-trading when the coronavirus pandemic brought sporting events to a halt earlier this year,” Cohen said.

“Barstool Sports founder Dave Portnoy has become the poster child of this day-trading craze that has taken Wall Street by storm. The big question is how many of these first-time day-traders will stay in the market once sports are back on?”

It makes for an interesting setup into the second half of 2020, with ongoing complications from the pandemic combined with some ASX sectors that have run particularly hard — most notably buy now, pay later (BNPL) stocks.

The heat in BNPL may be partly reflective of investor views around shifting consumption patterns that have been accelerated by the pandemic.

“Simultaneously, rising interest in the Zoom videoconference platform and pharmaceutical companies reflects how investors are betting on the companies that are providing solutions to the pandemic’s challenges,” Investing.com said.

At the same time, the well-documented investor preference for sectors that have been hardest hit, such as airlines and oil companies, also indicate that investors have looked to take advantage of potential discount opportunities.

And with the benefit of hindsight “that wasn’t such a bad move”, Cohen said.

“While market participants are still struggling to understand the true extent of the damage from the fast-spreading virus outbreak, many first-time traders chose to ignore the risk and buy the dip in some of the hardest-hit names in the market,” he said.