The Stock Market’s Record Highs Could Be Due To Pandemic Boredom
The stock market closed Thursday with the Dow Jones Industrial Average closing up 0.5% at 33,154, while the Nasdaq reached its highest point in two weeks at 13,480, jumping 1.8%.
The S&P 500 hit a record high, exceeding 4,000 points with a 1.2% increase from the prior day. But experts say the surge may not continue as people have other ways to spend their money now that restaurants and entertainment venues start to reopen, travel is increasing and the vaccinated population continues to grow.
The Wall Street Journal reported that the stock market rally of the past year may have been spurred by retail traders with nothing better to do. Dubbing the phenomenon the “boredom market hypothesis,” experts pointed to data showing that last April’s stimulus checks led to an immediately jump in retail stock purchases. Similarly, January stimulus checks also led to a retail stock surge, which was bolstered in early February by the GameStop stock rally, sparked by a group of retail investors on the Reddit sub-group, r/WallStreetBets.
However, the latest round of stimulus checks issued in March aren’t being used for the same purposes, statistics show. VandaTrack data shows that daily equity purchases from retail investors has stayed stable in recent weeks since stimulus deposits began to occur, the Wall Street Journal reports. On the other hand, Chase Bank reported that credit card spending has increased to 1.6% below COVID-19 levels, indicating an increase in retail spending.
While fewer retail investors pumping money into the market could lead to a dip in the Dow and other key indicators in coming months, some experts believe the pandemic has unequivocally changed the market. In February, a Bank of America analytics team wrote, “We believe some of the new retail activity is here to stay,” CNBC reported.
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