JPMorgan suggests in a new note that while retail investor dip-buying and that familiar “FOMO” (fear of missing out) feeling may well have been behind some of the bounce off the March lows, Joe E*Trade wasn’t the “main driving force”.
“We had argued before [that] US retail investors sold around $260 billion of individual equities during February and March in addition to the around $50 billion selling of equity funds”, the bank’s Nikolaos Panigirtzoglou writes, adding that the $260 billion of individual stock selling during February and March “was revealed by NYSE margin account data, which are predominantly used by retail investors and allow for maximum leverage of 2x”.
So, if we assume these figures do, in fact, suggest that retail was not the main driver behind the bounce, what does Panigirtzoglou say accounted for the majority of the bullish impulse?
Well, short covering and re-leveraging from larger players, including trend followers. “Other flows related to short covering, rebalancing and vol normalization by institutional investors have likely been multiple times bigger that the net equity flow by US retail investors”, he notes.
