Retail investors continue to back the US

Investors continued to back the US market in May, according to Freetrade’s monthly Retail Investor Barometer.

S&P 500 tracker funds rose to 5th and 8th places based on number of buy orders among Freetrade customers, while the top four positions were held by Tesla, Amazon, Apple and Alphabet.

However, retail investors’ belief in Meta faded during the month, only just making the top 15.

In addition:
Despite the recent Energy Profits Levy, BP, Shell and the Greencoat UK fund consolidated their positions as some of the most popular buys among retail investors in the past week
BP was also one of the biggest risers in May overall, as investors seek gains from buoyant oil prices
Rolls-Royce, Legal & General and Lloyds Banking Group maintained their popularity as Defence, Aerospace and Financial Services continue to be favoured by retail investors

Commenting on the findings, Freetrade’s Senior Analyst Dan Lane said:

“US tech is down but it’s clearly not out as far as Freetrade investors are concerned. Rather than run for the hills, investors are getting back to basics, re-examining these businesses and deciding their dominance is far from over.

“Valuations might have fallen but we’re starting to realise it’s a reflection of the pull-forward effect of the pandemic on the sector. The market got swept up in thinking tech was untouchable at one stage, so it’s maybe not a bad thing to see those multiples come back to earth for now.

“On reflection, it was unfair to expect the sector to sustain that level of growth but doubling down on the same firms now is pretty clear evidence that investors are thinking much longer-term now.

“The UK’s windfall tax has investors scratching their heads as to what it all means for the companies having to stump up the cash. But, with commodities still seeing high demand and hurdles to supply chains, any loss of appetite induced by tax hits might come after the near-term tailwinds have dissipated.”

Twitter falls out of favour

In contrast to April where Twitter rose to become the 2nd most popular stock among Freetrade customers, May saw the social messaging platform have one of the lowest buy to sell ratios* of any stock – with the value of sell orders 46% higher than the value of buy orders.

Dan added:

“It’s making less and less sense to group US tech firms together. With Twitter bedazzled by Elon Musk, Meta intent on exploring our virtual futures and Alphabet’s ad revenues getting eaten by TikTok, investors are clearly sensing the big names weren’t born equal after all.

“A rising tide may have lifted them all over the pandemic but the water is coming back in now and it’s up to each individual firm to stay afloat.

“Even before the pandemic, all had very different drivers, blockers and opportunities. Facebook’s privacy headaches were miles away from iPhone sales figures or Netflix user growth. So, separating their fates from here seems more in line with their overall trajectories than the pandemic boom would have us believe.”