The Power of Retail Traders is Here to Stay
Fresh concerns over market valuations are causing anxiety on Wall Street.
For decades, the stock market was viewed as something in which only the wealthy and the Wall Street elite participated.
In fact, in 2017, the top 10% of Americans controlled more than 84% of the total value of stocks, bonds, and other securities.
But the advent of online trading platforms and commission-free trading – along with the conditions created by the COVID-19 pandemic – have combined to revolutionize the market.
The rise of retail investors has spurred the market to new all-time highs, even in the midst of one of the most devastating public health crises in memory.
But concerns are mounting that the mostly inexperienced horde of retail investors that have little regard for risk are driving the market up, creating bubbles that could lead to a deep correction.
While these fears may be somewhat warranted, I believe the benefits of growing retail investors outweigh the negatives.
Where’s the money?
Some analysts will point to the dotcom bubble – and subsequent crash – as a comparable example of what’s to come.
Back then, throngs of retail traders shared trading ideas and stock tips online, much like we’ve seen recently on Reddit. Then, as now, coordinated buying sprees have led to a number of stocks to becoming disconnected from traditional valuations – creating worries that a correction is coming.
And if, just like the dotcom crash, we see retail investors pull out of the market after suffering losses, the drop will become even more steep.
And while I have said recently that we could see a correction in the market in the near future, I don’t believe it will be nearly on the same level.
In fact, there’s far greater reason for optimism in the market.
How do I get some?
I’ve said it a thousand times…
More aggressive buyers, prices go higher. More aggressive sellers, price go lower.
Right now, there are a massive number of new buyers in the market. That means prices will ultimately go higher in a wide range of stocks.
With so many people at home buying stocks instead of going out, we see stocks at all-time highs.
And even as things return to normal after the pandemic, I believe the wave of retail traders that entered the market over the last year are here to stay, even if we see a pullback in the short-term.
People have woken up to the enormous profits that even the smallest of investors can make in the market, and that’s not something that they’ll walk away from easily.
I expect the market to continue to rise – perhaps in fits and starts over the course of 2021 – but rise, nonetheless.
My favorite play to take advantage of the rising tide is to buy shares of the SPDR S&P 500 ETF Trust (SPY), an exchange traded fund that reflects the performance of the S&P 500.
Take Advantage of the Market’s Bloated Cash Flow
Readers of my flagship service, the 1450 Club, know that the key to finding winning trades is to follow the money.
And with more money in the market now than ever before, we’re flush with opportunities.
Just this week, 1450 Club subscribers had a chance to cash in an 81% gain or more after just one day as call options I recommended on Roku, Inc. (ROKU) went through the roof.
And it’s all thanks to my proprietary S.C.A.N. system which helps me to identify where the largest flows of money in the market are going.
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In the Spotlight: More Dovish Posture from the Fed
We’ve talked before about the potential that rising interest rates could sink an array of stocks.
Well, the Federal Reserve just signaled that it will take extreme measures to avoid that.
Fed Chair Jerome Powell is seemingly ready to exercise the power of the Fed to keep interest rates in check, even between regularly scheduled meetings – when interest rate policy is typically decided.
Speculation is rising that the Fed’s next move could be to adjust short-term lending rates, but that outcome is unlikely unless interest rates begin to get out of control.
Still, the continued efforts by the Fed to whatever it takes to keep interest rates low and the market humming is encouraging.
I’ll be keeping a sharp eye on the situation, and will update you on any important developments.