Above the Fold

Will the Rise of Individual Investors Add Volatility to Markets?

Remote work has not only allowed flexibility in many schedules, it has also offered consumers plenty of time to watch, trade and maybe even obsess a little over their investments. Where it might have been bad etiquette or even a fireable offense to have your portfolio up on your screen or digital device in the office, there’s no way for managers to enforce these types of policies off-site. In short, there are millions more people opening brokerage accounts and becoming heavily engaged in the market.

At Fidelity alone, retail accounts rose 17% to 26 million from a year earlier and trading volume at the wirehouse doubled year over year. Other major brokerages have reported similar jumps in individual account openings. Startup brokerage Robinhood, which was at the center of the GameStop chaos, has amassed more than 13 million accounts, some funded with as little as $5 to start. Today, more than 20% of U.S. equity trading volume is generated by individual investors, a 4.5% jump over 2019 and more than double what it was in 2010. 

Individuals tend to trade what they know or what their news sources endorse or suggest. Sometimes these recommendations can be heavily trending momentum stocks like GameStop, AMC Theaters, Rocket Mortgage or others that are becoming known as “meme stocks.” Meme stocks, driven irrationally by groups of investors who pile in and eventually jump out en masse, create immense localized volatility. Most experts see these extraordinary cases as limited, but at some level, one has to wonder about the impact the rise of individual, herd-like investors may have on the broader indexes. Over the last two years, observed volatility in the S&P 500 has been relatively “normal,” but stocks have also been generally bullish. Volatility tends to increase when markets are contracting. 

Three Things 

1. Will You Buy the World’s First Antibacterial Smart Light? – It’s no secret that UV light can destroy bacteria, but tech company LIFX has created a product called the LIFX Clean that promises to bring this tech to the masses for $70. The bulb uses a safer, high-energy visible (HEV) blue light with a wavelength of around 405nm. Based on several studies, HEV has been shown to kill a range of bacteria including  E. coli, salmonella and the nasty methicillin-resistant staphylococcus aureus, or MRSA. The light takes much longer to kill bacteria compared to UV light, but HEV won’t damage your skin or burn your corneas. 
2. Sands Leaves Las Vegas – Las Vegas Sands Corp. (LVS Sands) will be divesting out of its namesake holdings. The company announced a roughly $6.25 billion deal to sell its Las Vegas properties to Apollo Global Management and real estate investment trust VICI Properties. The company will focus resources on its locations in Singapore and Macau, which currently generate the majority of its current revenue. In addition, LVS Sands will explore other domestic opportunities in Texas and New York, as well as online gambling. 
3. Farmers Bet on the Come – American corn and soybean farmers are planting record amounts of acreage in anticipation of a continued rebound in commodity prices. The U.S. Department of Agriculture projects that farmers will plant an all-time record 182 million acres of corn and soybeans in 2021. Soybeans, in particular, have seen a near 70% leap in prices since bottoming in June 2020. Experts see an exceptionally strong year for farmers if current price trends continue, but weather will play a factor in final yields. 

Did You Know?

Martha’s Rebirth

After serving five months in jail, Martha Stewart was released from prison on this day in 2005. Martha was indicted on nine counts including securities fraud and obstruction of justice related to the sale of 4,000 shares of ImClone stock ahead of an adverse FDA ruling that would have cost her a little more than $45,600 in losses. The company was owned by friend Sam Waksal, but Martha insisted the sale was prompted by her stock broker. While never actually convicted of insider trading, Martha settled with the SEC. She took the experience in stride and went on to rebuild her empire through a myriad of appearances, media deals and partnerships.