‘Meme Stock’ Retail Investors Are Fleeing the Bear Market

June 22, 2022

The retail stock traders who jumped into the market during last year’s “meme stock” craze have been eager to exit as the market falls into bear territory.

According to data from Goldman Sachs, nearly half of the single-stock retail positions in the Nasdaq 100 and about a quarter of those in the S&P 500 that have been since January 2019 have been sold. Goldman also notes that call-option volumes have lost about 70% of the increases seen from the start of 2019 to November 2021, when bitcoin and many tech stocks peaked.

Goldman attributes the rise of retail investors and the meme stock mania to what they call the TINA narrative, which stands for “there is no alternative.” The idea is that Americans, stuck at home and flush with stimulus, saw no value in savings accounts or government bonds because rates were so low.

This led to record investment into risky assets like meme stocks, tech stocks, and cryptocurrencies. U.S. investors sank more than $1 trillion into stocks in 2021 alone, according to reporting from the Financial Times. That is more than three times the previous annual record. The market’s post-pandemic rally cemented the philosophy of “stocks only go up” for many new investors.

Now that stocks are going down, however, these investors are rushing for the exits. TD Ameritrade’s data on retail-investor behavior shows that they have been reducing exposure to equities all year.

“While historically retail investors have bought the dip, this time they haven’t,” wrote John Marshall, head of derivatives research at Goldman Sachs.

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