Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

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andysnp
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Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by andysnp »

There are reports that retail investors are driving up the market. Is this true?

The Federal Reserve reported:

10% of the wealthiest Americans own about 90% of the market.
The top 1% of the wealthiest Americans own 52% of the market
The bottom 50% of American's own about 0.7% of the market.

Which part are the Retail Investors coming from? If it's the bottom 50% of Americans, how can they influence the market? If they are buying, who is selling? Other retail investors?

Any thoughts?
Last edited by andysnp on Wed Sep 16, 2020 4:17 pm, edited 3 times in total.
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arcticpineapplecorp.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by arcticpineapplecorp. »

please show us the "reports" so we can critique for ourselves please.

I find this:
This could be driving lots of the economic inequality, because the returns to capital (owning stock) has been outpacing the returns to labor (pay from working). But by many measures the ownership of capital has never been more equal. For instance, two thirds of the stock market (public markets) is owned by institutional investors, including pension funds who invest their assets on behalf of working people who make up the bottom 90%. Pension funds also are among the biggest investors in private equity.

Traditionally, the rich were the only ones who owned stock at all. But stock ownership increased over the years through 401(k) type plans that made the market more accessible to many American households.

Image

source: https://economics21.org/stock-ownership-equity-wealthy
As of September 2019, the bottom 90 per cent owned US$4.6 trillion of equities, or 12 per cent of the total, the analysts noted.

source: https://financialpost.com/investing/how ... -ownership
Last edited by arcticpineapplecorp. on Wed Sep 16, 2020 3:48 pm, edited 1 time in total.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by oldfort »

I thought retail referred to any non-institutional investors.
loukycpa
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by loukycpa »

"Driving" - I am not so sure. But I overheard a conversation at the gym this week that made my stomach hurt. Paraphrase follows:

Guy #1 - "Did you see journal of health article about vaccine development? Sure did move the stock market when it hit".
Guy #2 - "Do you think I saw that ha? If it isn't about hunting or fishing or trucks I didn't read it. I do need to start reading about the stock market though. Buddy bought this and that and is making some serious bank."
Guy #1 (after some discussion) - "Here, you should just buy Vanguard Growth ETF. See it is full of Apple, Amazon (insert FANG). High concentration of everything you need to buy in one stock."

I am not sure I believe these kinds of folks are "driving" the market. But I don't believe this is going to end well for them either.
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andysnp
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by andysnp »

arcticpineapplecorp. wrote: Wed Sep 16, 2020 3:43 pm please show us the "reports" so we can critique for ourselves please.

I find this:
This could be driving lots of the economic inequality, because the returns to capital (owning stock) has been outpacing the returns to labor (pay from working). But by many measures the ownership of capital has never been more equal. For instance, two thirds of the stock market (public markets) is owned by institutional investors, including pension funds who invest their assets on behalf of working people who make up the bottom 90%. Pension funds also are among the biggest investors in private equity.

Traditionally, the rich were the only ones who owned stock at all. But stock ownership increased over the years through 401(k) type plans that made the market more accessible to many American households.

Image

source: https://economics21.org/stock-ownership-equity-wealthy
As of September 2019, the bottom 90 per cent owned US$4.6 trillion of equities, or 12 per cent of the total, the analysts noted.

source: https://financialpost.com/investing/how ... -ownership

This article shows who owns the market and the source is the Federal Reserve.

https://www.cnbc.com/2020/08/27/wealth- ... holds.html
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by Grt2bOutdoors »

Momo’s are driving the market -individuals and institutional players using margin and derivatives to “juice” their bets. A momo is a momentum player, very hot money with little stickiness. We all know how this might play out, but with the Fed providing ample liquidity in the form of reduced borrowing costs one can expect more speculative trades, not less. While they may “own” the holding period is much less than a traditional retail investor may be assumed to have.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by Xrayman69 »

When there are no sellers then even the small percentage of “retail” investors can drive markets up as there is limited supply for the demand.

Large holders have less flexibility in moving large number of shares without driving markets down because fewer can match the demand to buy. When large shares holders want to exit the want to exit in total often which can lead to panic.... last one out holds the bag. so on occasions and with automated algorithms this can lead to panic selling for fear of not k owing something (flash crashes)
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by petulant »

The price is based on the last transaction. Only a single share is necessary to "move the market." Obviously in reality if a single trade were too high or low it would spark a response. But it's certainly possible for a small portion of the total market to drive the recent prices.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by sperry8 »

andysnp wrote: Wed Sep 16, 2020 3:41 pm There are reports that retail investors are driving up the market. Is this true?

The Federal Reserve reported:

10% of the wealthiest Americans own about 90% of the market.
The top 1% of the wealthiest Americans own 52% of the market
The bottom 50% of American's own about 0.7% of the market.

Which part are the Retail Investors coming from? If it's the bottom 50% of Americans, how can they influence the market? If they are buying, who is selling? Other retail investors?

Any thoughts?
No, it's not true. Retail investors are not the primary drivers of the stock market. Just because it's "reported" doesn't make it true. The market is primarily owned by pensions, insurers, hedge funds, and sovereign wealth funds. To your point, once you add in the top 1% (perhaps even up to 10%) you've got the bulk of stock ownership.

https://awealthofcommonsense.com/2019/0 ... cks-bonds/

The reporters you're reading just love the "robinhood" story... but it's not true. Remember, reporters are no longer in business to tell the truth. They are in business to sell ads. So they say whatever they have to do that.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by Scooter57 »

The large investors who hold have no impact on prices. Nor do people buying index funds to hold for retirement. The surge in day traders has a big effect on prices of individual stocks, and when those stocks make up large percentages of the S&P 500 or NASDAQ indexes the way Amazon or Tesla do, their trades push up the indexes. Those indexes have become dominated by a very small number of hot stocks.

Blomberg reports institutions like pension funds are about to do quarterly rebalances, selling stock to keep at their allocations. When they do that it will affect the market to some extent. They also reported volume had been lower lately, making traders' impact higher.
Last edited by Scooter57 on Wed Sep 16, 2020 5:34 pm, edited 1 time in total.
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cos
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by cos »

Scooter57 wrote: Wed Sep 16, 2020 5:14 pm The large investors who hold have no impact on prices. Nor do people buying index funds to hold for retirement. The surge in day traders has a big effect on prices of individual stocks, and when those stocks make up large percentages of the S&P 500 or NASDAQ indexes the way Amazon or Tesla do, their trades push up the indexes. Those indexes have become dominated by a very small number of hot stocks.

Blomberg reports institutions like pension funds are about to do quarterly rebalances, selling stock to keep at their allocations. When they do that it will affect the market to SME extent. They also reported volume had been lower lately, making traders' impact higher.
This. Minority rule is a very real thing.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by hunoraut »

Scooter57 wrote: Wed Sep 16, 2020 5:14 pm The large investors who hold have no impact on prices. Nor do people buying index funds to hold for retirement. The surge in day traders has a big effect on prices of individual stocks, and when those stocks make up large percentages of the S&P 500 or NASDAQ indexes the way Amazon or Tesla do, their trades push up the indexes. Those indexes have become dominated by a very small number of hot stocks.

Blomberg reports institutions like pension funds are about to do quarterly rebalances, selling stock to keep at their allocations. When they do that it will affect the market to SME extent. They also reported volume had been lower lately, making traders' impact higher.


In addition to this, options activity --- which have rapidly increased in recent years --- have outsized pressure on underlying equity
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by Mickelous »

cos wrote: Wed Sep 16, 2020 5:22 pm
Scooter57 wrote: Wed Sep 16, 2020 5:14 pm The large investors who hold have no impact on prices. Nor do people buying index funds to hold for retirement. The surge in day traders has a big effect on prices of individual stocks, and when those stocks make up large percentages of the S&P 500 or NASDAQ indexes the way Amazon or Tesla do, their trades push up the indexes. Those indexes have become dominated by a very small number of hot stocks.

Blomberg reports institutions like pension funds are about to do quarterly rebalances, selling stock to keep at their allocations. When they do that it will affect the market to SME extent. They also reported volume had been lower lately, making traders' impact higher.
This. Minority rule is a very real thing.
When do pension usually do rebalancing, the end of the month or the beginning? For timing my own rebalances. Does it happen on a specific quarterly month as well?
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by neurosphere »

Mickelous wrote: Wed Sep 16, 2020 6:46 pm
cos wrote: Wed Sep 16, 2020 5:22 pm
Scooter57 wrote: Wed Sep 16, 2020 5:14 pm The large investors who hold have no impact on prices. Nor do people buying index funds to hold for retirement. The surge in day traders has a big effect on prices of individual stocks, and when those stocks make up large percentages of the S&P 500 or NASDAQ indexes the way Amazon or Tesla do, their trades push up the indexes. Those indexes have become dominated by a very small number of hot stocks.

Blomberg reports institutions like pension funds are about to do quarterly rebalances, selling stock to keep at their allocations. When they do that it will affect the market to SME extent. They also reported volume had been lower lately, making traders' impact higher.
This. Minority rule is a very real thing.
When do pension usually do rebalancing, the end of the month or the beginning? For timing my own rebalances. Does it happen on a specific quarterly month as well?
Even if there were indeed a set date, knowing the date would not help you, because others also know the date. For example, let's say you know that some giant pension fund needs to buy a lot of stock X on Feb 10th. So that's going to presumably make stock X go up. So, all the people that know that date buy stock X, 1 (or 2 or 3 or 10 or 100) days before that purchase, so the stock goes up BEFORE that date. And then, the date comes and the stock goes DOWN. Huh? Because all the people who expected it to go up on that date bought too much, raising the price and thus after the date the price falls rather than increases.

Summary: If you have this information so does everyone else, and "everyone else" is as unpredictable as you are. :D
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by Unchained »

Scooter57 wrote: Wed Sep 16, 2020 5:14 pm The large investors who hold have no impact on prices. Nor do people buying index funds to hold for retirement.
Of course holders impact prices. Price is a function of supply and demand. Supply is driven by, among other factors, those who hold.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by neurosphere »

Unchained wrote: Wed Sep 16, 2020 7:42 pm
Scooter57 wrote: Wed Sep 16, 2020 5:14 pm The large investors who hold have no impact on prices. Nor do people buying index funds to hold for retirement.
Of course holders impact prices. Price is a function of supply and demand. Supply is driven by, among other factors, those who hold.
Not exactly, kinda, maybe.

Think of "comps" when pricing a house. 100 homes in a subdivision. 3 identical houses sell for $400,000. What are all the other houses "worth"? So sure, if all 100 had been on the market perhaps they wouldn't have sold for $400,000. On the other hand, what if there were 100 buyers ready to pay $400,000, but not $405,000. After all, how many homes are there one can buy in the world? A house is a house and a stock is a stock. So yes, "supply" influences but not in the way you think. Let's tweak the example, let's say 100 identical houses. ALL are on the market but the prices are $100,000 through $200,000. All the houses at $150,000 and under sell, the rest don't. Those that don't sell were testing the market and are not intereste in selling for what they listed at. What are the remaining homes "worth"? They were ALL on the market, they were all available for sale and part of the supply. But there is no demand at that price.

The people who put their stocks on the market AND the price they list for, determine the price. Not everyone has to sell at any price. So those who aren't interested in selling don't directly affect price.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by TJSI »

Goldman Sachs (Global Market Research) periodically publishes a breakdown of who is buying and selling stocks. Their report for the first quarter of 2020 showed that foreign investors were the largest buyers of US equities buying $187 billion. Households bought $7 billion . Corporations via buybacks bought $129 billion of their stocks. The largest sellers were mutual funds selling $66 billion
and pension funds selling $119 billion.

Corporation have for the last several years been the largest buyers of stocks via buybacks.

So for the first quarter 2020, retail investors did not drive the market. However, Goldman Sachs projected for the full year that foreign investors would be the largest buyer at $300 billion while households would come in second at $280 billion a significant step-up from the first quarter buy of $7 billion. Retail investors would be the major driver for the rest of the year.

Goldman Sachs includes hedge funds as part of the households class.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by JackoC »

sperry8 wrote: Wed Sep 16, 2020 4:24 pm
andysnp wrote: Wed Sep 16, 2020 3:41 pm There are reports that retail investors are driving up the market. Is this true?
The Federal Reserve reported:
10% of the wealthiest Americans own about 90% of the market.
The top 1% of the wealthiest Americans own 52% of the market
The bottom 50% of American's own about 0.7% of the market.

Which part are the Retail Investors coming from? If it's the bottom 50% of Americans, how can they influence the market? If they are buying, who is selling? Other retail investors?
No, it's not true. Retail investors are not the primary drivers of the stock market. Just because it's "reported" doesn't make it true. The market is primarily owned by pensions, insurers, hedge funds, and sovereign wealth funds. To your point, once you add in the top 1% (perhaps even up to 10%) you've got the bulk of stock ownership.
See pg 14 of link for a breakdown of ownership of US stock by specific category in 2018 and 'institution' v 'household' over time
https://www.sifma.org/wp-content/upload ... merica.pdf

In the simple break down of 'household' v 'institution' households only directly own ~38%, but another ~38% is mutual fund and ETF shares which count as the stock 'owned by institutions', though the great majority of owners of MF/ETF shares are households. I guess few people here for example would view their MF shares at Vanguard* as institutional money rather than their own retail holding. So a significant % is owned by pension funds, insurers, hedge funds, sovereign wealth funds etc but not actually most.

And the OP question and your response tend to conflate two different things. The bulk of shares owned directly by households and near-directly through MF/ETF's are owned by *wealthy* households. The majority of the market is fairly directly controlled by households, but disproportionately by a small % of wealthy households. By contrast more of the money 'really' controlled by institutions is for the benefit of more moderate income people (the beneficiaries of pensions, insurance polices, sovereign wealth funds etc). Anyway for any practical purpose 'retail investor' means wealthy individual.

*predominantly though not entirely index funds. For MF's more generally a larger % are actively managed ones, in which case there's more of an ambiguity of 'who is driving the market' as to the stocks the fund owns. The active fund manager is the one driving whether this or that name or sector has more buying interest, but the mainly retail owners of the fund shares are the ones determining general buy/sell interest in the market by buying/selling their MF shares. There isn't really an objective answer to whether 'institutional' or 'retail' opinion is reflected in the buy/sell activity of active stock MF's. Activity in stock index funds (which the bulk of stock ETF's also are) is more clearly, mainly an expression of retail opinion.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by bluquark »

I'm not sure what the paradox is here. It seems you answered your own question. Only the top 10% of American earners have nonnegligible savings to invest, so the market is mostly being moved by retail investors who are part of the top 10%.

It sounds like you might be under the impression that the top 1% is so rich that they all invest via institutions, like billionaires do. But 1% of the US is 3.3 million people. The median 1%er is like a dentist or lawyer with a net worth in the single-digit millions, who still mostly invests on a retail basis.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by Jeff Albertson »

FRED - Federal Reserve Economic Data
top 1%
Image
from 90-99%
Image
from 50-90%
Image
from 1-50%
Image
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by bluquark »

sperry8 wrote: Wed Sep 16, 2020 4:24 pm No, it's not true. Retail investors are not the primary drivers of the stock market. Just because it's "reported" doesn't make it true.
They're at least driving the options market as of 2020.

Image

Just because they're driving a derivatives market, doesn't automatically mean that they're driving the stock market itself. But it's also more than anecdata to note that institutions are only accounting for 25% of options trades all of a sudden.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by UncleLeo »

Unchained wrote: Wed Sep 16, 2020 7:42 pm
Scooter57 wrote: Wed Sep 16, 2020 5:14 pm The large investors who hold have no impact on prices. Nor do people buying index funds to hold for retirement.
Of course holders impact prices. Price is a function of supply and demand. Supply is driven by, among other factors, those who hold.
Holders by definition will not sell what they hold, therefore whatever they hold is not part of the supply.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by Patzer »

andysnp wrote: Wed Sep 16, 2020 3:41 pm There are reports that retail investors are driving up the market. Is this true?

The Federal Reserve reported:

10% of the wealthiest Americans own about 90% of the market.
The top 1% of the wealthiest Americans own 52% of the market
The bottom 50% of American's own about 0.7% of the market.

Which part are the Retail Investors coming from? If it's the bottom 50% of Americans, how can they influence the market? If they are buying, who is selling? Other retail investors?

Any thoughts?
Buying and selling moves the market, because prices are based on what price people are willing to buy and sell at.
Owning doesn't move the market.

If 99.9% of stocks were held by 1 guy who was holding, not buying/selling. Then, the price would be entirely controlled by the remaining 0.1% of the market.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by vineviz »

UncleLeo wrote: Sat Sep 19, 2020 6:38 pm
Unchained wrote: Wed Sep 16, 2020 7:42 pm
Scooter57 wrote: Wed Sep 16, 2020 5:14 pm The large investors who hold have no impact on prices. Nor do people buying index funds to hold for retirement.
Of course holders impact prices. Price is a function of supply and demand. Supply is driven by, among other factors, those who hold.
Holders by definition will not sell what they hold, therefore whatever they hold is not part of the supply.
The “supply” of a good isn’t restricted to the quantity being transacted in the current period.

The decision to NOT sell something you own has just as much impact on price as the decision to sell it. This is easily seen by simply explaining “why” the holder of a stock chooses to not sell it.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by Angst »

Jeff Albertson wrote: Sat Sep 19, 2020 6:11 pm FRED - Federal Reserve Economic Data
top 1%
Image
from 90-99%
Image
from 50-90%
Image
from 1-50%
Image

Thank you Jeff for posting these great FRED charts. I hadn't seen them before but of course I've seen the percentages referenced many times. Visually, the changes between one graph vs. another with respect to the onset and follow-through of recessions suggests various interpretations, but given that the numbers have to add up to 100%, it's risky to draw conclusions without carefully thinking things through. I'd be interested to read what academicians have concluded about the historical buy/sell behaviors of these different breakout ranges with respect to each other and within the context of the time leading up to and through different recessions. It doesn't surprise me that it appears to have been different depending upon which recession one's considering.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by Jeff Albertson »

The difference between the top 1% and everyone else over the last ten years, since the great recession, is striking. Did the great recession shake out those who couldn't afford to own stocks? Maybe this quote attributed to JP Morgan is relevant: "In bear markets, stocks return to their rightful owners". Wm Bernstein wrote about this here: https://advisoranalyst.com/2020/05/25/t ... ners.html/
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by Mickelous »

Jeff Albertson wrote: Sun Sep 20, 2020 11:35 am The difference between the top 1% and everyone else over the last ten years, since the great recession, is striking. Did the great recession shake out those who couldn't afford to own stocks? Maybe this quote attributed to JP Morgan is relevant: "In bear markets, stocks return to their rightful owners". Wm Bernstein wrote about this here: https://advisoranalyst.com/2020/05/25/t ... ners.html/
Compounding sure is something.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by langlands »

Jeff Albertson wrote: Sun Sep 20, 2020 11:35 am The difference between the top 1% and everyone else over the last ten years, since the great recession, is striking. Did the great recession shake out those who couldn't afford to own stocks? Maybe this quote attributed to JP Morgan is relevant: "In bear markets, stocks return to their rightful owners". Wm Bernstein wrote about this here: https://advisoranalyst.com/2020/05/25/t ... ners.html/
The charts are quite intriguing, but there is a hidden factor that I don't think is being considered. Namely that categories such as "top 1%" and "90-99%" are not fixed and people can go back and forth between the categories. It's possible that the investing behavior between the percentiles is really that different, but that would seem to imply that the rich all buy during bull markets and sell during bear markets while the middle class does the reverse. It seems more plausible to me that what's really going on is that those who have a larger stock allocation during bull markets become rich and enter the top 1% and that those who have a smaller stock allocation during bear markets become rich and enter the top 1%. That also explains the data and is a much more direct mechanism. It also makes the trends in the data much less interesting.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by KlangFool »

cos wrote: Wed Sep 16, 2020 5:22 pm
Scooter57 wrote: Wed Sep 16, 2020 5:14 pm The large investors who hold have no impact on prices. Nor do people buying index funds to hold for retirement. The surge in day traders has a big effect on prices of individual stocks, and when those stocks make up large percentages of the S&P 500 or NASDAQ indexes the way Amazon or Tesla do, their trades push up the indexes. Those indexes have become dominated by a very small number of hot stocks.

Blomberg reports institutions like pension funds are about to do quarterly rebalances, selling stock to keep at their allocations. When they do that it will affect the market to SME extent. They also reported volume had been lower lately, making traders' impact higher.
This. Minority rule is a very real thing.

Thanks for a very interesting article.


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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by AlphaLess »

andysnp wrote: Wed Sep 16, 2020 3:41 pm There are reports that retail investors are driving up the market. Is this true?

The Federal Reserve reported:

10% of the wealthiest Americans own about 90% of the market.
The top 1% of the wealthiest Americans own 52% of the market
The bottom 50% of American's own about 0.7% of the market.

Which part are the Retail Investors coming from? If it's the bottom 50% of Americans, how can they influence the market? If they are buying, who is selling? Other retail investors?

Any thoughts?
If you want to have a quantitative argument, we need to see actual numbers.

With every 'fact' that you site, you need to provide those facts. Also, while it maybe a fact that there is a lot of retail participation, it is not clear whether retail is driving stock prices.

Qualitatively speaking, there is ownership and trading.

Increase in ownership drive prices up slowly and steadily.

Retail trading creates massive volatility, but likely in individual stocks.

I don't think retail can move the stock market, per se.

Large stock market moves are driven by speculators (hedge funds / CTAs) that control a lot of capital, using FUTURES. To trade $1M notional in futures, you need around 15% of that in a margin account.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by reln »

andysnp wrote: Wed Sep 16, 2020 3:41 pm There are reports that retail investors are driving up the market. Is this true?

The Federal Reserve reported:

10% of the wealthiest Americans own about 90% of the market.
The top 1% of the wealthiest Americans own 52% of the market
The bottom 50% of American's own about 0.7% of the market.

Which part are the Retail Investors coming from? If it's the bottom 50% of Americans, how can they influence the market? If they are buying, who is selling? Other retail investors?

Any thoughts?
Price is set on the margin (trading), so ownership doesn't set prices at all.

For price to change the trade volume needs to breech a fairly large floating threshold, so it's highly unlikely that individuals with small trading volumes move the market at all.
AlphaLess
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by AlphaLess »

bluquark wrote: Sat Sep 19, 2020 6:16 pm
sperry8 wrote: Wed Sep 16, 2020 4:24 pm No, it's not true. Retail investors are not the primary drivers of the stock market. Just because it's "reported" doesn't make it true.
They're at least driving the options market as of 2020.

Image

Just because they're driving a derivatives market, doesn't automatically mean that they're driving the stock market itself. But it's also more than anecdata to note that institutions are only accounting for 25% of options trades all of a sudden.
Actually, because options have a lot of leverage, and because retail investors don't understand that trading in the options market is not cheap, I am pretty sure that retail investors are driving the markets for certain hot individual stocks using options.
"A Republic, if you can keep it". Benjamin Franklin. 1787. | Party affiliation: Vanguard. Religion: low-cost investing.
AlphaLess
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by AlphaLess »

reln wrote: Sun Sep 20, 2020 11:52 am Price is set on the margin (trading), so ownership doesn't set prices at all.

For price to change the trade volume needs to breech a fairly large floating threshold, so it's highly unlikely that individuals with small trading volumes move the market at all.
This is patently false. RobinTrack has demonstrated the fallacy of your statement.
"A Republic, if you can keep it". Benjamin Franklin. 1787. | Party affiliation: Vanguard. Religion: low-cost investing.
OnTrack
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by OnTrack »

langlands wrote: Sun Sep 20, 2020 11:40 am
Jeff Albertson wrote: Sun Sep 20, 2020 11:35 am The difference between the top 1% and everyone else over the last ten years, since the great recession, is striking. Did the great recession shake out those who couldn't afford to own stocks? Maybe this quote attributed to JP Morgan is relevant: "In bear markets, stocks return to their rightful owners". Wm Bernstein wrote about this here: https://advisoranalyst.com/2020/05/25/t ... ners.html/
The charts are quite intriguing, but there is a hidden factor that I don't think is being considered. Namely that categories such as "top 1%" and "90-99%" are not fixed and people can go back and forth between the categories. It's possible that the investing behavior between the percentiles is really that different, but that would seem to imply that the rich all buy during bull markets and sell during bear markets while the middle class does the reverse. It seems more plausible to me that what's really going on is that those who have a larger stock allocation during bull markets become rich and enter the top 1% and that those who have a smaller stock allocation during bear markets become rich and enter the top 1%. That also explains the data and is a much more direct mechanism. It also makes the trends in the data much less interesting.
Another possible factor would be whether the top 1% tend to hold stocks that fall in price more during recessions than stocks held by the other categories?
langlands
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by langlands »

OnTrack wrote: Sun Sep 20, 2020 2:00 pm
langlands wrote: Sun Sep 20, 2020 11:40 am
Jeff Albertson wrote: Sun Sep 20, 2020 11:35 am The difference between the top 1% and everyone else over the last ten years, since the great recession, is striking. Did the great recession shake out those who couldn't afford to own stocks? Maybe this quote attributed to JP Morgan is relevant: "In bear markets, stocks return to their rightful owners". Wm Bernstein wrote about this here: https://advisoranalyst.com/2020/05/25/t ... ners.html/
The charts are quite intriguing, but there is a hidden factor that I don't think is being considered. Namely that categories such as "top 1%" and "90-99%" are not fixed and people can go back and forth between the categories. It's possible that the investing behavior between the percentiles is really that different, but that would seem to imply that the rich all buy during bull markets and sell during bear markets while the middle class does the reverse. It seems more plausible to me that what's really going on is that those who have a larger stock allocation during bull markets become rich and enter the top 1% and that those who have a smaller stock allocation during bear markets become rich and enter the top 1%. That also explains the data and is a much more direct mechanism. It also makes the trends in the data much less interesting.
Another possible factor would be whether the top 1% tend to hold stocks that fall in price more during recessions than stocks held by the other categories?
It's possible, but the stocks that fell most in 2000 were the tech stocks and those that fell most in 2008 were value stocks. So pretty different. And yet the same trend held in both bear markets.
reln
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by reln »

AlphaLess wrote: Sun Sep 20, 2020 11:54 am
reln wrote: Sun Sep 20, 2020 11:52 am Price is set on the margin (trading), so ownership doesn't set prices at all.

For price to change the trade volume needs to breech a fairly large floating threshold, so it's highly unlikely that individuals with small trading volumes move the market at all.
This is patently false. RobinTrack has demonstrated the fallacy of your statement.
jajajajajaja "patently," such fluff. Go argue with Eugene Fama and the rest of them.
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Re: Are retail investors driving the market? But I thought 10 percent richest own 90% of market?

Post by PicassoSparks »

People who hold do not participate in price discovery, but that doesn’t mean that the existence of their holdings has no bearing on supply and demand.
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