A Generational Shift Is Happening In The Markets – Mike Swanson (06/16/2020)

Something big has been happening in the markets since March. We are seeing what amounts to a sudden generational shift in those that are trading the markets. There was a fascinating story in the WSJ yesterday titled Investors Approaching Retirement Face Painful Decisions.

The sudden stock market drop in March and economic freeze has forced many people who have been in the stock market for years to sell all of their stocks and leave the market forever. They simply needed the cash during the freeze in the economy or can not risk sitting in the markets for years waiting for the next real bull market. The rally has mesmerized many, but almost everyone in the market is underwater this year and can’t risk their retirement nest egg anymore if they are soon to retire – or already have.

The WSJ found that many of retirement age have sold ALL of their stocks instead of hold in belief of a coming supposed economic boom. According to the story:

“Data from Fidelity Investments suggests millions of individuals have decided to do the latter. Nearly a third of investors ages 65 and up sold all of their stockholdings some time between February and May, compared with 18% of investors across all age groups.”

Money managers who believe the stock market’s rebound is justified have attributed the rally to aggressive central bank action, fiscal policy and projections that the U.S. will be able to contain the pandemic in the coming months. Those who are more skeptical point to the worries about another spike in coronavirus cases—especially after a wave of protests broke out around the country—that could send the market tumbling again.”

“In many cases, those hoping to retire in the coming years aren’t waiting around to find out who is right.”

At the same time as you know various brokers have reported a total surge in the opening of online accounts since March by people getting into the stock market for the very first time. These are mostly young people. The average age of a Robinhood trader is 31 years old. And these are people with very little money using small accounts to get into stocks that simply move fast and often are bankrupt or make no money – such as HTZ or NKLA. As I noted yesterday one of their favorite stocks to buy is the one that has been the worst performing stock in the entire S&P 500 all year.

I have seen a surge in new traders entering a market three times. The first was in 1999 and I was a part of that 90’s surge. The second was in forex and binary options after 2008 (the latter was a scam) and the third was in Bitcoin in 2017.

Seasoned traders on twitter have been mocking these young folks and pointing at the stocks they are speculating in as a sign of a manic top in the market, but another way to look at this whole thing is that we are seeing a generational shift in the markets in who the active trader actually is.

The older people still in the markets are either hanging on or are using their wisdom to get into precious metals and mining stocks, because the young people are not doing that.

The new traders are just buying what is on their app going up a lot on any given day. Few of them use charts or do any analysis at all and it probably won’t have a good ending for them just as Bitcoin didn’t in 2017, because I doubt many of them have any sort of strategy in mind for when they are buying or selling. If only these newbies would get into gold, silver, and mining stocks. If only they would sell things like NKLA and look at my top stock for this month and big cap mining stocks.

In the end though the report that 1/3 of everyone over 65 years old has sold ALL of their stocks is an amazing tidbit of news – with cultural, social, and political ramifications. Most of these people will probably never get into the markets again. If only they would look at gold too as I doubt having all of one’s money in cash over the next ten years is going to be a great idea either.

-Mike



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