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Retail traders say they’re not going anywhere: Morning Brief

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Friday, February 26, 2021

The retail rally is real. And it’s not going away.

The biggest and perhaps most surprising markets story of this pandemic is the huge surge in retail participation.

The narrative behind this trade has taken on many forms since stay-at-home orders were put in place last spring and then unevenly rescinded and reinstated. We’ve heard that retail’s participation is being driven by stimulus checks. Boredom. A lack of sports betting. An inability to travel. The market going up a lot. Stimulus checks again. More boredom. And the market still going up. In something approximating that order.

And while some Wall Street strategists questioned for months the role retail traders were playing in the market’s spring and summer rally, the strategy team at Deutsche Bank didn’t waver in its conviction that retail was playing a large role of this rally.

And the results of a recent survey from the firm point to a retail bid that is persistent and plans to stick around when the pandemic is behind us.

“A key question is if the surge in equity investment will sustain as the economy reopens,” Deutsche Bank strategists led by Parag Thatte wrote in a note to clients published Wednesday. “For their part, retail investors say they expect to maintain or add to their stock holdings even as the economy reopens, with younger respondents saying they are even more likely to do so.”

And as the chart below from Deutsche Bank shows, more than half of respondents from every income bracket and more than 58% of respondents in all three age groups covering those between 18 and 54 years old say they will invest more when the pandemic is over.

A majority of respondents to a recent Deutsche Bank survey said they would invest even more in the market when things return to their pre-pandemic normal. (Source: Deutsche Bank)

A majority of respondents to a recent Deutsche Bank survey said they would invest even more in the market when things return to their pre-pandemic normal. (Source: Deutsche Bank)

Earlier this month, we highlighted work from Goldman Sachs which perhaps sheds some light on why retail traders are so sure they want to stick around — because they are making money.

As Goldman’s work showed, even before the rally in so-called meme stocks like AMC (AMC), GameStop (GME), and others crescendoed in late January, there’d been a persistent outperformance in stocks favored by retail traders since May.

And in case you thought the bit of volatility we’ve seen in the market this week might shake this new retail cohort of their conviction in this market, Deutsche Bank’s survey has a data point for that.

“When faced with a hypothetical selloff, whether small or large, on net more respondents said they would put more money into the stock market,” according to Deutsche Bank. “New investors faced with small selloffs report they will put more money in, but would pull money out on net if the selloff were larger than 10%.”

A few percentage points more and perhaps we’ll find out how strong retail’s stomach really is.

By Myles Udland, a reporter and anchor for Yahoo Finance Live. Follow him at @MylesUdland

What to know today

Economy

  • 8:30 a.m. ET: Advanced goods trade balance, January (-$83.0 billion expected, -$82.5 billion in December)

  • 8:30 a.m. ET: Wholesale inventories, month-over-month, January preliminary (0.3% in December)

  • 8:30 a.m. ET: Retail inventories, month-over-month, January (1.0% in December)

  • 8:30 a.m. ET: Personal income, January (10.0% expected, 0.6% in December)

  • 8:30 a.m. ET: PCE Deflator, month-over-month, January (0.3% expected, 0.4% in December)

  • 8:30 a.m. ET: PCE Deflator, year-over-year, January (1.4% expected, 1.5% in December)

  • 8:30 a.m. ET: PCE Core Deflator, month-over-month, January (0.1% expected, 0.3% in December)

  • 8:30 a.m. ET: PCE Core Deflator, year-over-year, January (1.4% expected, 1.5% in December)

  • 9:45 a.m. ET: MNI Chicago PMI, February (61.0 expected, 63.8 in January)

  • 10:00 a.m. ET: University of Michigan Consumer Sentiment, February final (76.5 expected, 76.2 in prior print)

Earnings

  • 6:30 a.m. ET: Cinemark Holdings (CNK) is expected to report an adjusted loss of $1.46 per share on revenue of $79.78 million

  • 7:00 a.m. ET: DraftKings (DKNG) is expected to report an adjusted loss of 43 cents per share on revenue of $233.04 million

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DoorDash sales soared 226% with ongoing in-person dining restrictions [Yahoo Finance]

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