Mom And Pop May Finally Be Returning To The Stock Market (SPX, SPY, DIA, DJI, QQQ)
The stock market crash of 2008 has for many years caused an aversion to stocks among retail investors, but they may finally be coming back after a 188% run-up from the March 2009 lows.
Daily average revenue trades (DARTs) at leading online brokerage E*TRADE have been trending up since bottoming out in mid-2012, but in January, this metric soared 26% from the previous month to 195,652, marking the biggest monthly gain in nearly three years.
Now, E*TRADE DARTs — a common measure of the amount of commission-generating trades taking place per day on average over the course of a given month — are at the highest level since May 2010, suggesting trading activity has risen 61% since mid-2012.
Tom Lee, chief U.S. equity strategist at JPMorgan, thinks this is a good sign.
"Skeptics have argued to us that individual investors, who have pulled more than $345 billion from equities since 2007, are not likely to return to markets for years, maybe decades," says Lee in a weekly note to clients.
"This re-engagement by individual investors, we believe, is a positive and is naturally supportive of improving valuations and liquidity for stocks."
Of course, skeptics are likely to counter that such a surge in interest in the stock market at the retail level could be a contrarian indicator, suggesting the market's biggest gains are behind us at this point. However, that is unlikely to be taken as a controversial view, given the market's stellar performance in recent years.