Despite market volatility, retail investors went on a buying spree. These are the shares they took, says Vanda.

The turmoil in financial markets, with the failure of three US banks and continuing uncertainty over a major European bank, did not deter some investors from buying into the so-called dip in the stock market at one point last week.

That’s according to a weekly report released Friday by Vanda Research, which said retail investors scooped up $1.43 billion in underperforming financial and energy stocks, as well as some high-profile consumer tech names. large cap on Wednesday after two weeks of slow action.

Amid concerns about the health of smaller creditors, they bought “unprecedented amounts” from too-big-to-fail banks, totaling nearly $1 billion in retail inflows to the financial sector over the past five days. Vanda’s chart shows the net purchases of the last five days, with emphasis on financial purchases:

Marco Iachini, Senior Vice President, Giancomo Pierantoni, Head of Data, and Lucas Mantle, Data Science Analyst at Vanda, said Charles Schwab SCHW,
saw the second-largest inflow after Bank of America last week.

“Some adventurers” were buying First Republic Bank, FRC,
PacWest Bancorp PACW,
and Truist Financials TFC,
which they described as “riskier bets that could potentially offer massive upsides” if systemic risk can be kept in check.

Stocks rose on Thursday after federal authorities organized major banks to inject $30 billion into First Republic Bank FRC,
and avert a fourth banking meltdown, following the failures of Silicon Valley Bank, Signature Bank and Silvergate Bank last week. Credit Suisse shares CSGN,
meanwhile, it fell 25% last week, roiling global markets at times amid concerns over the Swiss banking giant’s very survival.

To read: UBS, regulators race to close Credit Suisse takeover deal: reports

However, the roller coaster ride returned on Friday, with finances strained and First Republic shares falling again after the bank suspended its dividend and reported higher borrowing costs. Some of the big banks involved in this deposit-to-lender scheme were also failing, such as JPMorgan Chase & Co. JPM,
Citigroup C,
Bank of America BAC,
and Goldman Sachs GS,

For the week, the Dow was down 0.1%, the S&P 500 gained 1.4% and the Nasdaq Composite jumped 4.4%, according to Dow Jones Market Data,

Schwab shares fell 3.9% last week, during which, at one point, executives assured shareholders that the brokerage remained “well positioned”. CEO Walter Bettinger and other executives bought nearly $7 million worth of stock during last week’s market turmoil.

Analysts at Vanda said some of that stock sector rotation was likely driven by profit-taking on the side of bond-themed exchange-traded funds (ETFs), with inflows in some of the biggest falling by $250 million in the past two weeks. . .

But it’s a delicate balance at the moment, with those investors likely to just keep buying stocks as long as a “systemic crisis” can be averted, analysts at Vanda said.

To read: Credit Suisse shares fall in their worst week since the 2008 financial crisis

To read: Consumer sentiment drops for the first time in four months – and that was before Americans knew about the SVB

Uncertainty over the Fed’s interest rate path made bond yields volatile last week, sending the ICE BofAML MOVE index to its highest level since the 2008 financial crisis on Wednesday.

Investors withdrew $8.8 billion from Schwab’s core money market funds last week, putting them into the brokerage’s government and treasury funds amid continued jitters over whether more shoes will fall in the banking crisis, Bloomberg reported. , citing company data.

Vanda said the energy sector also saw rising inflows after Tuesday’s market crash, although analysts said these are not the stocks that tend to attract traders’ loyalty; could dump these shares.

Haunted by the ghosts of late 2018 and the 2008 financial crisis, retail investors are in a fragile position, analysts at Vanda said.

They noted that the capitulation for investors in 2018 came in the fourth quarter, “when the stock market began to fall freely after an extended period of hiatus amid mixed comments from the Fed.” The S&P 500 index fell more than 9% in December 2018 amid concerns about Fed tightening, an economic slowdown and US-China trade tensions.

Markets are gearing up for next week’s Federal Reserve policy meeting. In federal funds futures, traders now see a 75.3% chance of a 25 basis point rally next Wednesday on concerns about inflation. This while bank stress hovers in the background.

To read: What it may take to calm banking sector jitters: time and a rate hike from the Fed.

“We also believe that ‘systemic risk’ fears related to the banking sector are more emotionally destabilizing for unsophisticated investors than any marginal sell-offs caused by Fed interest rate hikes or events outside the US,” analysts at Vanda said.

“We remain vigilant as we may see increased volatility in flows in the coming weeks, particularly if retail traders panic and start moving more of their assets into money market funds.”

These funds are perceived as safer because the investments are focused on lower-risk areas, such as cash and securities that behave like cash, such as CDs and Treasury bills.

One stock not getting any buying love they watch is Tesla TSLA,
which continues to underperform the broader market since a disappointing Investor Day earlier this month, the Vanda team said. Tesla shares have lost 13% this month, versus a 1.3% gain for the Nasdaq Composite COMP,

“We believe that, in this environment, TSLA may continue to lag behind as investors now have the opportunity to choose from other familiar stock market pockets that have been hit recently, such as energy or finance,” they said.

To read: Every walk cycle over the last 70 years ends in recession or financial crisis. “It won’t be any different this time,” says the Morgan Stanley strategist.

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