"At This Point, Really?" US Retail Investors' Stock Buying 'Fades'

US Individual Investors' Stock Purchases Slow in March
Shift to Cash Holdings, High-Interest Deposits, and MMFs

According to the Wall Street Journal (WSJ), individual investors' stock purchases have slowed down following the collapse of Silicon Valley Bank (SVB) in the United States. Instead of stocks, more investors are holding cash or seeking new investment options such as high-yield deposits and money market funds (MMFs).

On the 2nd (local time), market research firm Vanda Research reported that while individual investors' net stock purchases in February this year reached the highest level since 2014, they sharply declined just one month later in March. According to Vanda Research, last month's net stock purchases were at their lowest level since October 2020.

Individual investors' net purchases of U.S. stocks amounted to $8.9 billion (approximately 11.7 trillion won) over the 10 trading days ending on the 30th of last month. This is only about half of the $17 billion (approximately 22.4 trillion won) spent during the 10 trading days leading up to February 16, when net stock purchases peaked.

Marco Ichini, Vice President of Vanda Research, explained, "Individual investors are starting to step away from Excel," adding, "(Stock purchases) were not sustainable. Confidence began to waver."

[Image source=Reuters Yonhap News]

The deterioration of individual investors' sentiment can be attributed to the SVB collapse that occurred earlier last month. Although the SVB situation was quickly resolved, concerns about a domino effect of global bank failures persisted, especially as the collapse of Swiss bank Credit Suisse (CS) became a reality.

In fact, according to a survey by the American Association of Individual Investors (AAII), the proportion of investors predicting a decline in the U.S. stock market last month reached its highest level since December of last year. Despite speculation that the financial crisis could prompt the U.S. Federal Reserve (Fed) to halt interest rate hikes sooner, some investors are placing more weight on the possibility of a recession.

As investors' enthusiasm for stock purchases cools, the proportion of stocks in fund managers' portfolios is also decreasing. According to a survey conducted last month by Bank of America (BoA) targeting global fund managers, 44% of investors reduced their investments in U.S. stocks, causing the share of U.S. stocks in portfolios to fall to its lowest level in 18 months.

On the other hand, investors are moving funds into cash holdings, high-interest deposits, short-term financial products such as MMFs, and short-term government bonds. According to the Investment Company Institute, U.S. retail MMFs targeting individual investors have seen an inflow of $196 billion (approximately 258 trillion won) so far this year. This is the largest inflow for the first quarter since the company began tracking data in 2007.

Fifty-seven-year-old pastor Pete Smith from Pittsburgh has been investing in high-yield accounts, short-term financial products, and short-term government bonds for the past six months. He said, "There is great uncertainty about where the market is headed," adding, "I can receive the same dividends by investing in money market accounts or short-term government bonds, so why take on additional risk by holding stocks at this point?"

Garrett Fuller, a 28-year-old construction engineer working in Atlanta, also said, "Due to concerns about the economy, I sold 20% of the stocks in my securities account last month," adding, "I put the cash into a money market account with a yield of over 4%." He continued, "I might miss out on a big rally, but I wanted a safe position," and added, "I expect the economic outlook to be not very good for the next year or year and a half."

This content was produced with the assistance of AI translation services.