Retail stock traders are 33% less active than last month – and Goldman says the slowdown could continue as the economy reopens

investing problems
  • Trading activity among retail investors has dropped by 33% in April from last month, Goldman Sachs said in a note Monday.
  • The reopening of businesses and an increase in COVID-19 vaccinations may have contributed to the slowdown.
  • Stock buying by retail investors is still above pre-pandemic levels.
  • See more stories on Insider’s business page.

Retail trading activity has slowed down by more than a third in April, in part as people focus on getting back out after a year of COVID-19 restrictions and businesses restart as millions of Americans receive vaccinations, according to Goldman Sachs.

There’s been a 33% drop in broader volumes in US cash equity trading, or single-stock trading, this month from March, the investment bank said, citing data from retail brokerage Charles Schwab.

“We believe recently mixed equity performance and accelerating re-opening of the economy amid increased vaccination pace could partially explain the recent slowdown in retail activity,” Goldman Sachs equity analyst Alexander Blostein wrote to clients in a note published Monday.

The slowdown by retail investors reconciles with a decline in off-exchange market share by more than 400 basis points quarter-to-date compared with the same period in the first quarter of the year, “drifting to low 40%’s and closer to historical levels after reaching as high as 50% at various points in [the first quarter],” Blostein said.

Other firms that track activity by retail investors in recent weeks have also noted a slowdown. Investors who have received $1,400 stimulus checks in March as part of the US government’s COVID-19 stimulus efforts may have opted to purchase other goods and services, save the cash or pay down debt.

At the same time, the government has ramped up the availability of coronavirus vaccines to the US population, spurring many businesses to reopen their doors after closing them during the worst of the pandemic.

Still, retail trading remains significantly above pre-pandemic levels and features many structural changes such as zero-commission trading, said Blostein.

“While the degree to which retail will normalize is uncertain, further moderation in retail participation is likely to create meaningful headwinds to both US cash equity and option volumes.”

Retail investing has come into focus following the surge in interest in the stock market during pandemic, as well as volatility in so-called meme stocks that were stoked on social media sites such as Reddit. Video game retailer GameStop and movie-theater chain AMC Entertainment have been among the most popular names among retail investors looking to make a profit by squeezing short-sellers in the stocks.

A study by Schwab released last week showed that 15% of all US stock markets investors began investing in 2020. The median age of new investors is 35 years.

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