BBRG: Passive Investors Calmly Bought While Pros Liquidated

Wall Street Pros Panic Over Coronavirus While Mom and Pop Buy
Passive investors calmly bought amid the market plunge while the titans liquidated.
Bloomberg, March 17, 2020





Yesterday, I mentioned how introguing the difference between different S&P500 ETFs was; that sent me exploring various aspects of the sell off. It seems to be more institutionally than retail driven.

Looking at the S&P ETFs, we watched the sell-off progress. What happened next was fascinating: the Wall Street pros were net sellers and the Main Street Mom & Pop investors were net buyers. Some of this is attributed to different timelines between investors and traders, or between short-term and long-term. But one cannot help but think that some of this is explained by psychology: the professionals are the one whose bonuses and perhaps even their jobs are on the line. The retail investor looked to take advantage of a price drop.

But we can guess how this will develop, based on the latest data from Vanguard Group. According to the 5.6 trillion dollar firm’s most recent measures of money flows, every single day of February and the first week of March all saw a net gain for equities. As a percentage of assets traded, the average Vanguard customer moved no more than 0.3% of their capital around. And that was on Friday February 28th; there were a few days at 0.2%, and most of the time period it was at 0.1% or less. Over the two weeks between February 24th and March 6th, between 62% and 79% of the asset shifts were towards equities.

This is very similar to what former Vanguard Chairman and Chief Executive Officer William McNabb observed during the financial crisis in 2008-09…


See full column here



I originally published this at Bloomberg, March 17, 2020. All of my Bloomberg columns can be found here and here



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