Who’s Driving the Stock Market?

There’s no denying that there is an orgy of speculation going on in certain areas of the stock market.

This chart from SentimenTrader clearly shows that smaller investors are aggressively buying like no other time during the 21st century.

Retail might be adding fuel to the fire, but does anybody really think they’re driving the stock market? The move off the lows was due to a confluence of events:

  • Fed liquidity
  • The fastest bear market ever leading to extreme positioning (see next chart) that got unwound in a hurry
  • The worst case scenario not materializing and things actually getting better

There are 51 stocks in the S&P 500 that are up 100% from their lows. The average position on Robinhood in terms of popularity is 732 (median 420). Of these 51 stocks, only 2 are in the top 10, and only another 9 are in the top 100.

Robinhood users might not be all in on all of the best performers, but the Dave Portnoy effect is real. Just look at the volume in United.

The tricky thing about untangling all of this is that it’s impossible to look at the data and conclusively determine who or what is driving prices. And because we can’t rely on the data, we turn to stories, and in terms of market stories, this is about as juicy as it gets.

The bigger issue here is not what stocks are they driving, but what does this speculation signal for the overall market? My opinion, nothing really.

I know it’s easy to say “this will end badly,” and maybe it will, but between the quarantine lock down, free commissions, and Dave Portnoy, this was the perfect time  for people to start playing around in the stock market. I think it’s as simple as that.

I’m of the opinion that small traders might be impacting certain stocks, but I have a hard time believing they’re moving the stock market.



This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.