Are equity prices being driven up by people bored and stuck at home?

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NoRegretsCoyote

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I heard a casual theory that a lot of the equity price rises we've seen since March last year can be accounted for by retail traders. People are sitting at home with no sport to gamble on and nothing to spend their money on either, so have become investors instead :)

This CNBC story had tends to think so:

It’s not just equity prices that are hitting new highs in 2021. Trading volumes for stocks and options are at records as well.........Much of it is being driven by retail investors, who are continuing the high level of engagement that began in 2020...... the evidence points to increased retail trading as the primary culprit in the overall increase in volume.....While attention focuses on big names like Tesla as a target of retail interest, Sosnick believes that much of the real volume increase is coming from obscure names on the low end of the trading universe.
Click to expand...

And,

Trading volumes have doubled in two years

Equities: Average daily volume

  • 2019: 7 billion
  • 2020: 10.9 billion
  • 2021 so far: 14.7 billion
Click to expand...

Zero interest rates probably help this too.

What do you think?
 
You need to see the numbers. There is no doubt that covid and the introduction of commission free trades on Robinhood has increased the amounts of trades placed but you need to see the numbers to see how much of an impact it has. Institutional investors can place massive trades in one go that would have a bigger impact on prices. But people are a lot more willing to pay a higher price for stocks and confidence is high. This is also one of the arguments made why growth has outperformed value over the last 12 years.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
The Financial Times recently reported that since Covid began over 4 million Americans have opened up on-line brokerage accounts. Given that sports gambling effectively ceased for a while, some people are now treating the stock market as a casino.

The Irish Times had another article yesterday in which one commentator suggested that "wall of money" going into the stock market was going to continue for some time, as it is not being financed by debt.

How else can you explain the P/E ration of Tesla, which was at 1,658 yesterday?

Jim Stafford
 
Jim Stafford said:
The Financial Times recently reported that since Covid began over 4 million Americans have opened up on-line brokerage accounts. Given that sports gambling effectively ceased for a while, some people are now treating the stock market as a casino.
Click to expand...

There was actually a spike in gambling when the first lockdown happened with people betting on all kinds of things like marble racing and online bingo. The same would be true of the stockmarket. Look at Hertz, the stockprice went through the roof despite the company being bankrupt. More proof that there is a gambling addiction problem out there.
 
Is it more the case that people are chasing the same few stocks, Tesla , bitcoin etc rather than the stock markets in general. Alot of the enquiries even on this site are about investing in the S&P500 specifically. I'd say a few stocks are generating most of the trading, Tesla is the most traded stock now even in Europe
 
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