Submitted by Nicholas Colas of DataTrek Research
Today we want to expand on our recent thoughts on “What are retail investors buying right now?” We showed last week, courtesy of Fidelity Investments data, that mom-and-pops are still adding to positions even on breakouts in US equities. Further, the names at the top of the retail investor league table tend to be single stock Tech names rather than ETFs. Yesterday, for example, Fido’s retail customers were net buyers of NVDA, AMZN, and BABA and those names were the most heavily traded.
One way to assess general interest in any topic is to see what “Autofills” as you start typing into a search engine box. For example, enter “Buy a” into Google, and in NYC the autofills are: “Star”, “bitcoin”, “car”, “domain”, “dog”.
We assume the first is a holiday gift idea and the second a reflection of the ongoing crypto craze. And “Bitcoin bites dog” does seems to capture the spirit of the age… Autofill works, after all, by using Big Data analysis to guess what you might type next based on how other users in your area completed the same initial text.
To see which specific equities search engine users express the most interesting in purchasing, we typed “Buy stock in” and then noted what Google, Yahoo and Bing came back with in terms of autofills.
For Google “Buy Stock In” the autofills were: Amazon, bitcoin, Apple, Tesla, Weed
For Yahoo!: Marijuana, Amazon, Facebook, Disney, Tesla
For Bing: Amazon, Nike, Wal-Mart, Google, Netflix
Not surprisingly, technology companies dominate popular investment interest; do not, however, slough this off as less-informed retail investors just buying what they know. The point here is that the general population thinks these are the most attractive investment ideas – stocks they want to, or wish they could, own.
This is one (of several) reasons we question the sustainability of any rotation out of the large cap Tech sector in the context of a continued bull market for US stocks generally. Simply put, for many individual investors technology IS the US equity market. And if those stocks do not continue to rise, their enthusiasm for allocating incremental capital to equities may well diminish. Will they trust a US stock market where financials or industrials are the leadership names?
It is hard to imagine “Buy stock in Citibank/JP Morgan/Wells Fargo” ever making it to the top of the autofill charts.