If 2020 was the year that people mostly stayed in, it’s also the year retail trading broke out to the mainstream.
Retail investors now account for 1/5th of all of the U.S. stock market’s trading volume and this continues to rise. Coincidentally, retail is increasingly a source of intelligence for institutional investors as well.
Since the inception of stock exchanges in the U.S., institutional investors have essentially “run” the market, with few exceptions (i.e. 1929). Today, armies of individual traders the world over are now trading from their bedrooms, in front of the TV and on the move.
Retail traders can be both unpredictable and fickle – many would argue their faith in U.S. tech stocks underpinned the S&P 500’s ‘against the odds’ performance this year. Yet, on the other hand, they largely shunned UK stocks – even though many look a great price after a tough year. Second guessing how these millions of individuals will trade is almost impossible and it’s led to what I refer to as ‘the retail trader mystique’ – a desire to better understand them and how they think.
TradingView is a charting site and social network for retail traders and, while we don’t have all the answers, we certainly know them better than most. So as 2020 comes to an end, we reached out to 2,000 out of our 2m strong U.S. community to ask them to reflect on 2020 and what’s in store for 2021.
The covid-19 retail trading boom is real
Let there be no doubt, retail trading grew as a result of the pandemic. Nearly two thirds (63%) of U.S. traders we spoke to said they traded more due to covid-19. We experienced this first-hand at TradingView, seeing our registered U.S. user base double in 2020.
Aviation to soar, entertainment and hotels to plummet
When quizzed on which struggling stocks will bounce back best in 2021, Southwest Airlines (LUV) (40%), American Airlines (AAL) (36%) and Delta Airlines (DAL) (35%) took the top three spots. The outlook is gloomier for entertainment and hotel equities, with AMC (AMC) (56%), MGM (MGM) (31%) and Wynn (WYNN) (25%), all tipped as most likely to struggle in 2021.
The majority of retail traders had a good year
Over half (57%) of the TradingView users we spoke to had a good year. Of these, a fifth (21%) reported that 2020 had been a ‘triumph’ and that they were finishing the year up significantly, while over a third (36%) reported modest gains.
At the other end of the spectrum, 12% had a year of ‘underperformance’ and an unlucky 6% referred to 2020 as ‘an unmitigated disaster.’
Not again...
When asked which industries featured in their portfolios at the start of 2020 that won’t feature at the start of 2021, retail (26%), travel (25%), leisure / entertainment (21%) charted highest among TradingView users.
Which industries are retail traders backing in 2021?
Retail traders are backing tech (53%), pharma (44%), healthcare (43%), energy (40%), and financial services (24%) stocks for growth in 2021.
And which industries will continue to feel the squeeze?
No surprises here: retail (41%); leisure / entertainment (36%); travel (35%); mining (31%); and defense (28%).
ESG isn’t preoccupying retail traders
The rise of ESG is very real but, based on what our users are telling us, it’s yet to make major inroads into the retail trading community. Only 7% of TradingView users view ESG as critical to informing their trading choices. While a further 37% believe it to be ‘important but not the only determiner,’ many believe it to be either ‘irrelevant’ (33%) or have no strong views (23%).
They’ll trade from anywhere
In perhaps the clearest sign of how the physical act of trading has changed, TradingView users reported trading from a host of locations. These included expected domestic settings such as the living room (70%) and bed (59%) and unexpected settings in the home such as the kitchen (46%) and the bathroom (37%).
Outside the home, nearly half (46%) reporting trading in the car, over a third (34%) in parking lots, a quarter in restaurants (26%) and a surprising 15% admitted to trading in restaurant / bar restrooms.
The takeaway from all this? One could argue – at a high level at least – that retail traders aren’t so unpredictable after all. Anticipating the re-opening of the economy, they’re backing aviation stocks to bounce back in 2021, as well as supporting stalwart industries such as tech, healthcare and pharma. No wild cards there.
Perhaps the biggest question is whether the covid bounce in retail trading will continue into 2021. We are confident it will. With over half of those we surveyed enjoying a strong 2020 in the most challenging trading climate imaginable, we believe they’ll be emboldened to carry on striving for their financial targets in 2021.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.