The GameStop mania might be over, but retail investors look here to stay

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  • A new, younger, more social-media-savvy cohort has entered the fray from the GameStop mania, a phenomenon that affects brokerage companies and traditional investors.
  • “We believe some of the new retail activity is here to stay,” wrote an analytics team at Bank of America in a report to clients.
  • Since the start of 2020, retail trading as a share of overall market activity has nearly doubled from between 15% and 18% to over 30%, according to Credit Suisse.

The GameStop bubble has come and gone but the rookie investors who speak emoji and Reddit may be here to stay with big implications for brokerage firms, as well as traditional investors who must pay closer attention to where this fast-moving, smartphone app-wielding crowd is moving next.

“We believe some of the new retail activity is here to stay,” wrote an analytics team at Bank of America in a report to clients.

Bank of America’s team found that the unprecedented surge in brokerage app downloads during the GameStop mania is continuing at a rapid pace this month even with the GameStop trade itself now forgotten. Credit Suisse data shows retail trading as a share of overall market activity has accelerated in recent months and has now doubled compared to the start of last year.

Plus, with the potential for a new round of stimulus checks this month, another rush of cash from these new investors could be ahead.

Retail trading has been accelerating since the industrywide decision to drop commissions in the fall of 2019. Since then, the pandemic-fueled market volatility brought new investors into the world of stocks, sometimes for the first time. Work-from-home, stimulus checks and higher personal savings levels, as well as social media platforms like Reddit, have only accelerated the boom in retail trading.

There were 3.7 million downloads of Robinhood in January, according to app market intelligence firm SensorTower, even with the millennial-favored stock trading app’s unpopular decision to put trading restrictions on a handful of stocks during GameStop’s climb. After the GameStop drama in February, downloads are still tracking strongly with 1.8 million month-to-date.

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Traditional brokerages like Charles Schwab and E-Trade also saw an influx of new clients, as well as new entrants like Webull. The download levels well surpassed the retail participation seen during the Covid-19 pandemic.

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