CEO of Robinhood rival shines fresh light on what retail investors are doing. Wall Street needs to pay attention.

Critical information for the U.S. trading day

From the start of the COVID-19 pandemic two years ago, a newish crowd of retail investors emerged, pouring extra cash into equity markets and steering Wall Street into places they never dreamed of, such as meme stocks.

Our call of the day, from the founder and chief executive officer of competitive stock trading app Zingeroo, says institutional traders would be wise to keep paying attention to an increasingly sophisticated retail investor.

Prepandemic, notes Zingeroo’s chief Zoë Barry, the retail crowd represented 10% of the volume that was traded and didn’t share trading ideas — often seen in the Gen. X and older crowd. That figure then hit a high of 25%, and with it came much chattier investors.

“[Wall Street] completely underestimated what it would be like if 25% of the volume turned in a certain direction and turned away from institutional,” Barry told MarketWatch in a recent interview.

Related:  ‘The Fed is breaking things’ – Here’s what has Wall Street on edge as risks rise around the world

“…Gen. Z has actually started sharpening their pencils and doing the research as to what to do in a bear market.”— Zoë Barry, CEO of Zingeroo

“And now Wall Street is all over sentiment data and they’re looking at what people are seeing, but they also want the core trading numbers because there’s a gap between what people chatter about and say online, versus what they actually trade,” she said.

As a former analyst at Dawson Capital, Barry said she wants to know what traders are saying versus what they’re trading, and why there are inflows on certain stocks. “If I were institutional, I would be very, very wary of shorting a stock that has the potential to be a heartthrob of retail investors,” she said.

Barry’s app, which launched last autumn, is a rival to Robinhood HOOD, +0.56%, but features “bullpens” — chat groups to discuss investing topics — and “zones,” where performances can be benchmarked against others, while trades can be verified by “trading cards.”

Related:  Dow falls over 250 points as investors await details on Fed plans to shrink balance sheet

The serial entrepreneur said 80% of Zingeroo’s users are millennials and Gen. Z, with the rest Gen. X plus. The younger crowd, she said, views trading activity as their so-called “M.B.A.” — investing in themselves and their own financial diversity.

“I think young retail investors are beginning to have a longer-term outlook than just you know, what is happening this week in the markets. I think that’s an overall positive for them,” she said. “They’re investing in the stock market and they’re investing in themselves and increasing their financial literacy and that’s positive.”

And in the first part of the quarter, there was lots of chatter about young investors being lost in the wilderness of a bear market. “And what we saw was Gen. Z has actually started sharpening their pencils and doing the research as to what to do in a bear market,” said Barry.

As for differences between generations, she said the Gen. X plus category will auto liquidate via stop losses, millennials tend to buy the dip, while Gen. Z is even more sophisticated. For example, she noted recent action on the SQQQ, -3.57%, a three-times leveraged inverse exchange-traded fund that tracks the Nasdaq-100, and called that “definitely unusual behavior for a retail investor.

Related:  Here’s Jim Cramer’s advice to navigate this uncertain earnings season

“They basically said we’re not sure which of the growth stocks are going to be impacted most, so I’m not smart enough as a retail investor to pick exactly what stock will pull back,” said Barry. They are also not worried about catching the exact bottom of a market, but instead are looking at stocks they think will have a greater chance of being a future fundamental success.”

And this crowd “understands the future tools that are happening right now,” and are overall more bullish on themselves, their future potential, and the economy overall, despite the geopolitical meltdown and rising inflation, said Barry.

Original Article

Leave a Comment