Wall Street professional investors who have always claimed to be "smart money" have fled under the callback of US stocks. However, retail investors who are described as "stupid money" have become the backbone of the US stock market's rebound in the darkest moment.
A year after a bumper financial harvest for American households, high inflation is emptying their wallets.
The data shows that in April 2020, the personal savings rate in the United States hit a record high of 33.8%. But now, this trend has been reversed.
The personal savings rate in the United States has dropped from 5% in March to 4.4%, the lowest level since the 2008 financial crisis, and American household savings may have disappeared.
On the contrary, Americans launched a spending spree driven by credit cards: American consumer credit soared again in April, setting a new record compared with March.
As inflation greatly exceeds the increase in wages, consumers begin to rely on savings and credit cards to pay for daily necessities and non-necessities
However, Bank of America found that even if the wallet "bottomed out", retail investors have always disdained trading "recession" or cut investment, but have been buying high-risk stocks.
From the perspective of Wall Street, the behavior of retail investors is extremely risky. However, behind every rebound of US stocks, it is inseparable from this huge rookie army.
In a report entitled "Quantifying Everything Traders Want to Know", Bank of America subverted some traditional investment concepts through analysis and verification.
Bank of America strategists found that, on average, retail investors performed slightly better in stock selection than hedge funds.
From this perspective, the old adage that "it's time for retail investors to leave" is not so applicable.
Editor/Phoebe
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