The headline literally says “Free Trades” and it’s on the main page of Bloomberg news.
While it’s tough to know what’s causing what – bull markets are fueled by new converts but also lure them – trading volume at online and discount brokers has exploded. TD Ameritrade Holding Corp., which started offering free trading in October, has seen million-trade days multiplying at a record pace.
Along with E*Trade Financial Corp., daily average revenue trades – a standard industry metric that may be a bit of a misnomer now since buying and selling is free – have almost doubled to an all-time high since last September, data compiled by Sundial Research showed.
This might not end well:
“It’s partially driven by free commissions, but I don’t think it’s just that, because not everyone is offering free commissions,” Frederick said. “The fact that we have been in a bull market for a long time, people are just optimistic. Things are going up and they continue to go up.”
Hot stocks get the most attention. At TD Ameritrade, Apple, Microsoft Inc., Tesla and Virgin Galactic have been among the highly traded this year, according to JJ Kinahan, the firm’s chief market strategist. Shares of the two tech giants have climbed at least 9%, double the S&P 500’s gain. Tesla, Elon Musk’s automaker, and Virgin Galactic, Richard Branson’s space-tourism company, have done even better, with triple-digit advances. Virgin Galactic, in particular, has seen retail investors talking up their positions on message boards like r/wallstreetbets on Reddit.
“There’s sometimes no fundamental reason for it. It just is based on perception – a perception based on narratives that run only an inch deep,” he said in note. “Let’s see how much longer it persists. This kind of activity often unwinds much faster than the wind up.”
The late 90s had a tech stock FOMO.