Inflation, supply chain hiccups : Wall Street and the retail investors

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Wall Street is reeling under the pressure of rising costs and supply chain discrepancies. But even at this time, retail investors continue to be the major buyers.

Mike Wilson, chief investment officer and chief U.S. equity strategist for Morgan Stanley, has added to the above statement.

He said that retail investors are investing more and more money into US stock markets. This is unlike the predictions of longer market recovery.

These individual buyers continue to be the major buyers and traders in this dip. Retail participation is high regardless of the worries stemming from supply chain disruptions and inflations. Even at times, the stock market seems to perform better.

In September analysts had addressed if retail investors had at long last run out of dry powder or eagerness to purchase the dip. But, according to Mike Wilson, such investors have remained steadfast, even increased.

Retail investors have been the purchasers of domestic stocks since last year and increasingly more new investors entered stock exchanges across the globe. Retail investors’ purchasing power has developed during this period with GameStop-AMC short-squeeze as an example.

He believes that the strong inflows from individual investors are supporting valuations even at the high. Even if the fundamental picture collapses, this will continue until it subsidizes or reverses.

As noted, earning revision breath is turning over. A portion of this is because of higher cost and supply deficiencies which these investors consider as temporary.

Though retail investors are not annoyed, he voiced his concern over inflation and supply chain pressures.

Analysts like him are sceptical as data says continued supply chain pressures, soaring costs, and potentially weaker demand. But they are not sure about the future of this supply deficiency crisis and how it will affect the earnings estimates.

Apart from this diminishing business confidence, price rise hits the consumer confidence. But these amateur traders are not deterred by it. They have realized stocks offer insurance against rising costs, to a certain extent.

Analysts expect these investors to expand it into a long-term diversified portfolio or a rotation from bonds to stocks.

But many do not see them as a positive sign, because whenever such huge numbers of individual traders enter a market, there is a poor market around the corner.

There are concerns about whether this would be a temporary trend. In some cases, governments are placing restrictions on them.

But both the market and the human mind are unpredictable. It could go anywhere and make any decision.

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