Bullish options trading has been declining over the last month as retail investors focus their attention on the economic reopening, Deutsche Bank finds

NYSE Wall Street coronavirus
  • Bullish options activity from retail investors has started to decline in recent weeks, Deutsche Bank strategists said.
  • The decline in options trading has coincided with an uptick in mobility indicators, restaurant bookings, and air travel.
  • It’s a sign that the retail-trading frenzy may be dying down as the economy re-opens.
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After heightened activity in 2020, the volume of bullish options trading has fallen since late January in a sign that retail investors are starting shift their attention, according to a team of strategists from Deutsche Bank.

In a Friday note, the strategists said that the size of call options trades that have risen and now fallen are small, indicating that they’re driven by retail investors. This comes as Wall Street begins to question whether the stay-at-home retail trading frenzy that was seen most prominently during the GameStop short squeeze will die down as the economy reopens and investors spend their money and time on other activities.

Deutsche Bank data also showed that mobility indicators, restaurant bookings, and air passenger traffic have all risen significantly in recent weeks as retail call volumes decline.

“This jives with our view that as retail investors have other things to do, the attention focused on the equity market will start to fade,” the firm said.

The options activity decline has also dragged down a basket of stocks with the highest call exposures that Deutsche Bank tracks. The group of stocks soared 160% in just over three months since November. However since mid-February, the basket has tumbled 24%, compared to the average stock in the S&P 500, which is up slightly in the same time period.

Although a lot of firms predicted that retail investors would put a large chunk of their stimulus money into stocks, Deutsche Bank found that two-thirds of those payments have already been distributed, implying that the impact of stimulus should start to fade in the market.

The analysts also noted that as these call volumes decline, stock market volatility may also trend lower. This could prompt systematic investors to raise already elevated allocations to stocks to record high levels, according to the strategists.

options activity

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Fundstrat’s Tom Lee says another epic rally in stocks hit hardest by COVID-19 could be coming soon

Hilton Hotel
  • Fundstrat’s Tom Lee said stocks in sectors hit hardest by the pandemic like travel and retail may be due for a rally. 
  • The head of research explained that the third wave of COVID-19 cases may be peaking in the US. When this happened after the second wave, epicenter stocks rallied shortly after, he said.
  • “From a market’s perspective, a rolling over of COVID-19 should be a “risk-on” signal for epicenter stocks,” said Lee. “The reason, naturally, is that epicenter stocks are more sensitive to lockdowns and benefit from economic re-opening.
  • View Business Insider’s homepage for more stories.

History shows that another rally for stocks hit hardest by the pandemic could be on the way. 

That’s according to Fundstrat’s Tom Lee, who wrote in a note to clients on Monday that “epicenter stocks,” or stocks in sectors like travel, retail, and services, could be poised to gain in the near future. 

The head of research explained that the third wave of COVID-19 cases may be peaking in the US. When this happened after the second wave, epicenter stocks rallied shortly after, he said. 

“From a market’s perspective, a rolling over of COVID-19 should be a “risk-on” signal for epicenter stocks,” said Lee. “The reason, naturally, is that epicenter stocks are more sensitive to lockdowns and benefit from economic re-opening. Hence, we should expect the epicenter stocks to rally.”

Read more:RBC unveils its 15 top biotech stock ideas for 2021 as the sector is poised to take off on the back of pandemic-related innovations and new funding

Lee said that the percentage of the US with declines in COVID-19 cases is at 62%. That’s the highest level since August. He also noted a recent comment from former FDA commissioner Dr. Scot Gottlieb, who said on Sunday that COVID-19 cases may be peaking nationally. This thinning out of cases could be a good sign for stocks that hinge on an economic reopening. 

Although this could be a temporary rollover of cases, and holiday gatherings could cause a spike in cases, Lee said COVID-19 is still rolling over earlier than he expected.  

Names in his basket of epicenter stocks include travel companies like MGM Resorts, Hilton Worldwide, Marriott, Norwegian Cruise Line, and Royal Caribbean, retailers including AutoNation, Harley-Davidson, Hasbro, L Brands, and Best Buy, and restaurants like Darden Restaurants and Starbucks.

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Zoom could soar another 57% as work-from-home will continue long after the pandemic era, says a senior stock analyst

FILE PHOTO: Small toy figures are seen in front of diplayed Zoom logo in this illustration taken March 19, 2020. REUTERS/Dado Ruvic/Illustration
Small toy figures are seen in front of diplayed Zoom logo

  • D.A. Davidson’s Rishi Jaluria believes Zoom will be an essential product long after the coronavirus vaccine is deployed and workers return to offices. 
  • The managing director and senior research analyst told CNBC on Wednesday Zoom could surge another 57% to $600 following its incredible rally this year. 
  • No one is going to be a hundred percent remote or 100% in the office, and I think zoom for example, is a critical part of making that happen,” the analyst said.
  • Shares of Zoom slipped as low as 6.9% shortly after the Wednesday opening bell. 
  • Watch Zoom trade live here.

D.A. Davidson’s Rishi Jaluria believes Zoom will be an essential service long after the coronavirus vaccine is deployed and workers return to offices. The managing director and senior research analyst told CNBC on Wednesday Zoom could surge another $600, a 57% upside from current levels, following a massive rally this year.

Jaluria explained that the nature of work has been “irreversibly changed” by the coronavirus pandemic, and he anticipates that the future of work will be a hybrid of remote and in-person activity.

“No one is going to be a hundred percent remote or 100% of the office, and I think zoom for example, is a critical part of making that happen,” the analyst said.

If investors had to name one stock of the year for 2020, it’d likely be Zoom. The virtual conferencing software company skyrocketed roughly 500% this year as video calls went from a less-adequate substitute for a “real” meeting to the only way to conduct business. 

After such an massive rally, some investors may be doubtful that the stock could go any higher. But Jaluria said the benefits of Zoom will be long-lasting. 

Read more:We spoke to short-seller Rob Majteles, who says he was ‘wrong early’ on Tesla, but he still believes the market is due an ‘extraordinary reassessment’

Zoom has pared back some gains from its highs in October, and Jaluria said now is a great buying opportunity for the company. Shares dropped 6.9% shortly after the open on Wednesday to as low as $380.

The analyst added that he sees opportunities in other work-from-home stocks including Fastly, Twilio, Docusign, and RingCentral, which are all providing necessary services for enabling the hybrid work future, he said.

“I do think a lot of these names have a good amount of upside, especially because I feel like the market is starting to actually trade down a lot of these work from home names because they think post pandemic, that benefit fades away,” said Jaluria. “And as we think about this future of work, I think it’s fair to say that these benefits aren’t short-term, they are very long lasting [and] irreversible.” 

Read more:UBS says buy these 20 discounted small-cap and mid-cap stocks expected to take off in 2021 – including one that could rally 60%

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Most institutional investors say the market is underestimating COVID-19’s long-term impact on the economy, a Natixis survey finds

A man wears a protective mask as he walks on Wall Street during the coronavirus outbreak in New York
A man wears a protective mask as he walks on Wall Street during the coronavirus outbreak in New York.

  •  A new Natixis Investment Managers survey of  500 institutional investors found that 8 in 10 say the market is underestimating the pandemic’s long-term impact on the economy.
  • The results reveal a stark contrast to calls from more bullish voices, like Wharton’s Jeremy Siegel who says the economy and stock market will be stronger than expected in 2021.  
  • The survey also highlighted the sectors investors anticipate will outperform in 2021, and the areas they’re most concerned about heading into next year.
  • Visit Business Insider’s homepage for more stories.

Eight in 10 institutional investors say the market is underestimating the COVID-19 pandemic’s long-term impact on the economy, and 79% don’t expect a full economic recovery until 2022 or 2023.

That’s according to the recently released Institutional Investor Outlook survey from Natixis Investment Managers. The firm surveyed 500 institutional investors who collectively manage more than $13 trillion in assets in 29 countries. 

The survey results reveal a stark contrast to more bullish calls on the economy, like Wharton’s Jeremy Siegel who says the economy and stock market will be stronger than expected in 2021.  

The S&P 500 continues to break new records, but over three quarters of investors are wary of assuming that run will continue- 78% of institutional investors say current market growth is unsustainable, while 95% see the potential for a market correction in at least one sector. 

Read more:The equities chief at $1.4 trillion Franklin Templeton says stocks are ‘priced for perfection’ – but investors still shouldn’t wait to get in. He tells us 9 ways they can get the market-beating returns.

According to Natixis, investors are most concerned over a correction in real estate, technology, and cryptocurrency. 

However, technology and healthcare are two sectors investors expect to outperform in 2021. 66% expect technology to outperform in 2021, while 65% expect healthcare to exceed expectations. But investors anticipate more beaten-down sectors of the market, like real estate, financials, and industrials to continue to underperform.

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