Another Week of Pandemic Madness

• Online brokers have experience a record number of account growth

  • TD Ameritrade had 608,000 accounts opened in its most recent fiscal quarter

  • E-Trade gained 363,000 accounts in the quarter

  • Schwab saw 609,000 new brokerage accounts opened this quarter as well

Who is Opening Accounts?

• Stock market participants can be divided into two main categories

  • 1) institutional investors— money managers, mutual funds, endowments, insurance companies, family offices, etc

  • 2) retail traders— moms & dads, teenagers, college students, individual traders, etc

• 90% of E-Trade's new accounts came from retail traders and Schwab also reported that a majority of its new additions came from individuals opening accounts

• Is is evident that recent market volatility has come in part by a flood of new retail investors

My Take on Why This is Happening?

• Many people are assuming the stock market will rise as fast as it fell (and it has so far— though we are still in the early stages of this global health crisis) and are aiming to cash in on seemingly cheap stocks

• With not much to do at home, more people have the time to open accounts and trade

• According to the Financial Times, 73% of Americans have had their incomes affected by COVID-19 and many may be looking for news ways to make some side money

• With no casinos open and very few sporting events to bet on, I have no doubt that many are quenching their thirst of gambling via stock trading

The Bottom Line

• In my opinion, as retail traders induce volatility and account for more and more trades due to the aforementioned factors, market prices become less credible