Retail investors appear to be unperturbed by the strong momentum that equity markets witnessed so far into the year and are reluctant to take a break from infusing fresh funds into stocks.
According to data compiled by JPMorgan Chase & Co. strategist Peng Cheng, the category of non-professional investors bought a whopping $1.5 billion of single stocks in the week ending Tuesday, marking an all-time high, reported Bloomberg.
Most of the inflow into single stocks went into just three names - Tesla Inc (NASDAQ: TSLA), Apple Inc (NASDAQ: AAPL) and NVIDIA Corp (NASDAQ: NVDA), which accounted for 43% of the S&P 500's gains this year, the report said.
Nvidia has registered over 200% gains since the beginning of the year while Tesla has witnessed over 140% rise during the period. Apple shares have gained over 47% on a year-to-date basis. At the same time, the S&P 500 has risen just over 14% while the Nasdaq Composite has gained about 30% in 2023, according to Benzinga Pro.
Skepticism: Much of the rally this year was a result of AI-led optimism. Retail investors jumped on the wagon not intending to be left behind after institutions piled into such stocks. What is noteworthy is the fact that the rally came in the midst of a banking crisis in the U.S., consecutive rate hikes by the Federal Reserve to tackle decades-high inflation and a lingering debt ceiling crisis that almost pushed the government into default.
Analysts, however, are wary of the momentum and have repeatedly sounded out alarms about the possibility of a correction. For instance, Morgan Stanley's top equity strategist Mike Wilson recently reiterated his year-end target of 3,900 for the S&P 500 while warning that a profit recession is still underway. "Inflation is going to come down. It's not going to be good for stocks because that is where the earnings power has been coming from," said Wilson.