Bond Guru Calls Retail Trading Activity “Downright Terrifying”

Despite the coronavirus pandemic, retail investor activity has reached a fever pitch as stay-at-home traders are taking advantage of the volatility for profit. To DoubleLine Capital CEO Jeffrey Gundlach, this height in retail trading activity is “downright terrifying.”

“Of course retail investor activity is downright terrifying,” said Gundlach. “We just see how much trading is going on in retail.”

Per a recent CNBC report, “Gundlach alluded to some of the blame for the retail trading boom falling in the lap of the federal government’s unprecedented stimulus. The funds aided many struggling Americans, but for others, the stimulus money reportedly made its way back into the stock market. Gundlach likened the newbie investors to a kid who is offered candy from a stranger.”

“It looks like people are kind of re-gifting the candy the con has given them … they are throwing that candy into this retail investment fervor,” added Gundlach”

“This is a terrible sign for the condition of the market for anybody who’s experienced a significant number of cycles, which I’ve definitely experienced,” Gundlach said.

Where the Retail Activity Is

If today’s retail investing environment were a drama series, it wouldn’t be called “The Young and the Risk-less.” Millennials and Generation Z investors are anything but risk-averse according to an E*Trade survey.

“Millennial and Gen Z investors are willing to stomach far more risk than they have in the past, according to fresh data from E*Trade,” a Yahoo! Finance article noted. “The company’s quarterly investors survey found that over half of these younger investors indicated that their risk tolerance has increased since coronavirus, far higher than other groups.”

“E*Trade’s survey, which polled 873 investors, found that 51% of young investors have increased risk tolerance — 23 percentage points higher than the total population,” the article added. “Furthermore, this cohort is getting out of cash, trading more, and full of optimism where the market is concerned. Around 34% of investors under age 34 have moved out of cash and into the market, which is 15 percentage points higher than the total population.”

Savvy ETF investors sensing an opportunity could consider the Global X Millennials Thematic ETF (MILN). MILN seeks to provide investment results that correspond generally to the price and yield performance of the Indxx Millennials Thematic Index.

MILN Chart

MILN data by YCharts

In the case of MILN, the underlying index is designed to measure the performance of U.S. listed companies that provide exposure to the millennial generation, (collectively, “Millennial Companies”), as defined by the index provider. The millennial generation refers to the demographic in the U.S. with birth years ranging from 1980 to 2000.

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