The year 2022 was a challenging time for the
stock market, and retail traders were among
those who felt the pain. Data compiled by
VandaTrack Research indicates that the
average retail investor portfolio was down by
approximately 27% since November 2021.
Despite four double-digit bear market rallies
since then, retail investors remain hesitant to
raise their risk exposure due to the multiple
losses they experienced last year. The
analysts at VandaTrack believe that growing
recession risks could also be a headwind
holding retail animal spirits at bay.
Although stocks have rebounded in 2023, with
the S&P 500 posting its best rally since last
August, the good times may not be here to
stay. As earnings season gets underway, the
S&P 500 is projected to post about a 7%
decline in first-quarter earnings from a year
ago. Reports from tech companies will be
critical, as tech stocks have outperformed this
year, pushing the Nasdaq 100 into a bull
market. Some prominent analysts have
expressed concern that the rebound in tech
could be losing steam. However, retail
investors remain concentrated in high-profile
stocks like Apple, Tesla, Nvidia, and Advanced
Micro Devices, Inc., which account for a
significant portion of their portfolios.
Of these stock picks, Nvidia has had a notable
rally, up 84% this year due to the excitement
surrounding Chat GPT and AI engulfing the
market. However, VandaTrack strategists warn
that earnings weakness from these four names
could be a "heavy hit" to individual investors.
Therefore, it's essential to keep an eye on
earnings reports and diversify one's portfolio to
manage risk effectively.
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