The S&P 500 finished the week about 0.2% lower, but stocks enjoyed a fantastic April and rebounded 12.7% after plummeting 12.5% in March. As a result, the S&P 500 just strung together its worst and best months since 2008 and 1987 respectively, and investors enter May bracing for more volatility. Clearly coronavirus and the immediate fiscal and monetary policy responses are the overwhelming causes for these incredibly volatile markets and will likely continue to drive investor sentiment, but we wanted to point out a seldom discussed market development. Retail trading volumes, or trades by non-professional investors, have exploded. Last year virtually every broker began to waive trade fees and through the end of 2019 we observed a logical and steady rise in retail trading volumes. However, Daily Active Revenue Trades (DARTs), a metric by the brokerage industry that represents average trades per day, have increased exponentially since the beginning of the year (see chart from SentimenTrader below). Exactly what this means for the market is unclear, but a flood of retail trading volume is certainly not reducing market volatility, and Reuters estimates that “mom and pop” investors make up around 20% of all US trading activity. It will be interesting to monitor how the DARTs trends continue as the global economy reopens, but it does appear as though sports betting has to some degree been replaced by day trading.
Ian Browning | Director, Investment Strategies & Shareholder
Peter E. Simmons | President & CEO