Has the marginal equity buyer gone?


• The erratic behavior of retail investors this past week and the spreading of equity ETF outflows out to non-US equities casts doubt on the idea that retail investors will serve as the marginal buyer of equities in the current conjuncture - especially after buying an unprecedented $100bn of equity ETFs in only one month during January.
• The potential withdrawal of retail investors as the marginal buyer of equities could create clear downside risk for equity markets for the near term, especially if one takes into account the deterioration in equity market liquidity.
• This is not only because institutional investors appear to be unwilling to become the marginal buyer against a backdrop of elevated volatility, low market liquidity and disappointing economic releases.
• But also because the other big incremental buyer of equities we envisage for this year, i.e. share buybacks, might take some time to materialize.

JPMorgan