Retail investors’ strong ‘buy-the-dip’ impulse will help keep stocks buoyant in 2021, says TD Ameritrade’s JJ Kinahan

Happy Stock Market Investor
Retail investing has boomed in 2020 and 2021.

  • Retail investors’ strong buy-the-dip impulse should help support stocks over the coming months, JJ Kinahan said.
  • The TD Ameritrade strategist said uncertainty about inflation and the Fed should bring volatility, however.
  • Retail investors have been snapping up recent dips largely through buying ETFs, analysts say.
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Retail investors have been eagerly buying the dip and it’s supporting US stocks despite uncertainty about the economy and monetary policy, TD Ameritrade’s top strategist JJ Kinahan has said.

“Anytime you see stocks move down 3% or less, you’re seeing people come out really quickly to buy things,” he told Insider this week.

Kinahan said he thinks the buy-the-dip impulse is set to continue. And he said he doubts there will be big drops in US stocks this year.

But he said uncertainty around inflation and when the Federal Reserve will cut back on its support for the economy will increase volatility in US stocks in the coming months.

Kinahan likened investors’ persistent buying to American football tactics. “If you’re running a play that works, you don’t stop running it until the other team stops it. Right now, buy the dip, nobody’s stopped it.”

TD Ameritrade is one of the biggest electronic brokers, with more than $1 trillion in client accounts.

The S&P 500, the US benchmark stock index, has consistently hit record highs despite periodic sell-offs. For example, stocks fell around 2.5% over two days in the middle of July, only to rise 3.7% over the next five days.

On one of the days stocks slid in the middle of July, retail investors bought a record $2.18 billion of equities, according to data company VandaTrack.

Amateur traders snapped up exchange-traded funds like State Street’s SPY, which tracks the S&P 500, or Invesco’s QQQ, which tracks the Nasdaq 100.

JPMorgan said in a note at the end of July retail investors had also bought the dip in Chinese stocks, which have tumbled after a crackdown on big companies by Beijing.

Nikolaos Panigirtzoglou, a JPMorgan market strategist, said retail investors had also been drawn to ETFs as a way to gain exposure to cheaper Chinese stocks.

However, Viraj Patel, a strategist at Vanda, said retail investing may now slow due to US unemployment benefits lapsing and the fact that Americans have the chance to go out and spend on other things as the economy reopens.

Kinahan said the reopening is likely to boost the economy and so support US stocks over the coming months.