America’s generation with more wealth than anyone else, the baby boomers, had to do with bonds in 2020, but just started to lead a retail charge again in the stock markets. That’s according to independent research company Vanda Research, whose latest weekly data tracker showed individual investors returning to stocks earlier than expected after a month in February. And leading the pack were Americans born between 1946 and 1964, Vanda Research said.
“Boomers bought more bonds than stocks throughout 2020, while millennials aggressively bought stocks. Older investors started getting involved with the stock market again only towards the end of last year (November 2020) and their activity peaked this month. It‘s the first time we’ve seen boomers leading the stock inflows, ”said Giacomo Pierantoni, Vanda’s research analyst, in emailed comments. Since mid-February, individual investors have underperformed the S&P 500 SPX, + 0.25% by 11%, according to VandaTrack, which provides daily data on individual investors’ net purchases of US-listed funds. Analysts had expected a hibernation period after that, but recent data revealed that average daily purchases of US securities reached $ 1.2 billion on April 6, then $ 1.5 billion on April 7, more than double a low. $ 772 million on March 26. That inspired Vanda analysts to see where the momentum toward equities might come from. “Some of the data suggests that the wealthiest of the boom generation may have been responsible for the increase in purchases. The average age of investors in platforms such as Schwab or TD Ameritrade is close to 50 and they are much richer than millennials, ”Pierantoni and senior strategist Ben Onatibia said in a note. As of the fourth quarter of 2020, the boomers owned just over half of the total wealth of American households, according to data from the Federal Reserve. That’s a portion of $ 64.72 trillion, compared to $ 5.89 trillion for millennials born after 1980, and $ 33.06 trillion for Generation X, born between 1965 and 1980.
The types of stocks that were bought also offered clues, they said. “Their behavior is also much more conservative than that of younger investors.” Most of the stocks that topped our leaderboard this week are premium stocks, while the more speculative stocks such as [videogames retailer GameStop] GME, -0.93% or [movie-theater chain] AMC, -1.27% has withdrawn ”, they said. The following VandaTrack chart shows the average realized volatility of the 30 most bought stocks each week (relative to the S&P). The graph also “suggests that investors are being more conservative than in previous rallies,” they said.
A robust and continued rollout of COVID-19 vaccines in the US and President Joe Biden‘s $ 1.9 trillion infrastructure package may be encouraging investors to invest in stocks, even if markets appear to be stuck at those all-time highs lately. Another reason Vanda suspects boomers are in the markets is due to unusually large flows into sovereign bonds and exchange-traded credit funds. Last week, he noted, individual investors injected more than $ 416 million into the 30 largest fixed income ETFs listed in the US, the most on record. The iShares iBoxx $ investment grade corporate bond LQD ETF, + 0.17% was the largest contributor, with $ 128 million in purchases, Vanda said.
Charles Schwab, Vanda
“While most Robinhooders tend to stay away from ‘boring’ fixed income products, boomers, who are closer to retirement, often prefer them to stocks. Charles Schwab’s monthly client data shows that entries to ETFs and bond MFs [mutual funds] they have been twice the size of the shares ”, said Pierantoni and Onatibia. Read: ETF Wrap: One Year and Change, and OK, Boom