Prospect Of Older Investors Returning To Stocks Has Wall Street Excited

While frenetic buying by retail investors gets all the press for driving the recovery in stocks, the beachhead established by newly minted Robinhood day traders was always a tenuous one. Now Wall Street is getting excited about a potentially bigger and more powerful force that is led by older Americans with more money.

It’s a case stock bulls are increasingly drawn to after a stellar second quarter fizzled out in a disappointing June. Equity strategists are eying the intentions of a more affluent middle-aged set that remained mostly unmoved by the frenzy that broke out in chatrooms and elsewhere in April and May, scene of the fastest S&P 500 rally in nine decades.

For all the bullishness among the Robinhood crowd, there’s still among older generations a healthy dose of pessimism, a sentiment that appeals to contrarians. Evidence of their skepticism surfaced as money flowed out of equity funds last quarter, vehicles that JPMorgan Chase & Co. says are preferred by older hands. Cash at retail brokerages like Charles Schwab Corp. remain near a record high and the latest survey from the American Association of Individual Investors showed bears outnumbered bulls by a ratio of 2-to-1.

“The older generations of U.S. retail investors has been so far more cautious on equities than the new generation,” JPMorgan strategists led by Nikolaos Panigirtzoglou wrote in a note. “The equity buying by retail investors will likely strengthen as the older cohorts, which have so far preferred to extract any remaining value in credit via buying corporate bond funds, will switch later in the year into equity funds.”

As everyone knows by now, small-time day traders, armed with stimulus money and possibly in search of distraction with casinos and sports leagues closed, rose up as a formidable force in the rally that began in March and lifted the S&P 500 by 44%. Their presence on the free investing app Robinhood dominated headlines, as favored industries like airlines and hotels roared back in the rebound.