Will Retail Traders Recover? - Being a wise investor happens to be an easy gig when stonks only go up. Think about it; when the bulls are running, it's pretty easy to just grab a horn and ride along.
Just a hypothesis: most retail traders are on the long side of the market, and their portfolios typically consist of only shares owned in a few handfuls of companies, indices, or ETFs.
My guess is that elaborate diversification allocations and complex, multi-leg options strategies for downside protection and risk management might be a touch elusive to the newly minted retail trader.
Everyone was doing it. Robinhood, those sanguine fintwits, forced us to start talking about retail trading; WallStreetBets forced us to never forget about the little guy.
After combining something akin to gaming & trading coupled with $hitloads of newly found free time during WFH, we all became stock market degens, coo-coo for the next snap-trade that would go to the moon.
Who can blame the little guy for getting emotionally attached? When stocks were literally just ripping higher and higher and higher for months on end, there was some serious Fear of Missing Out amongst those who didn't have access to the market just yet.
Dollar after retail dollar poured into meme stocks and growth names.
And as the 10Y yield has risen, growth names have taken a dump, and retail investors' portfolios have moved in correlation with this metaphorical dump.
In a broad market downturn, for an investor that only holds long positions, there are indeed very few places to hide.
If you were squarely in tech growth names and missed the bus on a rotation to value and energy earlier this year, you might be down 50% YTD. Those are shitcoin-esque returns.
This type of soul crushing is not conducive to helping produce a sustained motivation for retail traders to continue dumping their hard-earned bananas into stonks. Succinctly put: our aforementioned FOMO is drying up.
I have no doubt that r/WallStreetBets, as a movement and probably a way of life, will survive, just like I know that even if their share price goes to basically zero, even Robinhood will continue to enable access to payment-for-order-flow-captive capital markets for the average joe/joe-ette.
The question really becomes: will your portfolio survive?