#Small investors with stimulus funds drive post-coronavirus market surge

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A growing day-trading obsession during pandemic lockdowns is helping to drive stocks higher despite the weakening economy.
Alamy images; NY Post photo composite

Move over hedge fund titans, Joe Sixpack is taking over the stock market.

The recent rally, which has pushed the Dow up 45 percent from its coronavirus lows, is being driven in good part by mom-and-pop investors high on stimulus checks, the rise of free trades and apps like Robinhood, experts say.

The Dow on Wednesday closed at 26,989.99 — just 5.4 percent below where it was at the start of the year before the coronavirus sent the economy into a tailspin. The rebound has caught many stock market pros off guard amid record unemployment and sagging corporate profits, including hedge fund founder Paul Tudor Jones, who said on Tuesday that he’s baffled by the rally.

But in a recent note to clients, Deutsche Bank analyst Parag Thatte concluded that small investors have been behind much of the recent buying by overlaying Robinhood trading app data on top of general market activity. The result, he said, is that so-called smart-money traders are “now chasing” the day traders.

Anthony Denier, of online trading platform Webull Financial, agrees. Volume on his platform surged nearly 500 percent between February and May, with the average user turning over their portfolio by roughly 75 percent a day, he said.

“It’s a perfect storm,” Denier told The Post. “We’re all home. Some people are making bread, and some are saying, ‘Hey, how can I make the stock market work for me?’ And with the Fed [pumping money] into the markets, they’re thinking ‘How can I lose?’”

“Many new investors see this environment as an opportunity to get into the market,” added a spokesperson for Schwab about the brokerage’s user data for April.

Wall Street insiders like to blame Robinhood, a trading app popular with millennials that has been credited with the rise of the no-fee trade. Robinhood says it’s seen a 30-percent jump in users this year, to 13 million, despite embarrassing outages in the early days of the pandemic, when volumes overwhelmed its servers.

“I have seen some friends plowing in through Robinhood or similar apps,” one hedge fund manager said. “No financial background, feeling like geniuses that they are up so much in the last few months.”

To be sure, the mom-and-pop revolution has resulted in some strange trading patterns, including a 1,250 percent surge in a little-known Chinese online real-estate company on Tuesday. The reason cited on social media was its name, FANGDD Network, which resembles FANG — code for tech giants Facebook, Amazon, Netflix and Google.

Also helping drive the retail boom is Dave Portnoy, the millionaire founder of Barstool Sports, who has taken up day trading in the absence of sports and who posts expletive-filled videos about his wins and losses.

“I’m the new breed. I’m the new generation,” Portnoy boasted in a video on Monday. “There’s nobody who can argue that Warren Buffett is better at the stock market than I am right now. I’m better than he is. That’s a fact.”