- The COVID-19 pandemic accelerated a revolution in retail investing, fueled by stimulus checks and the rapid rise of mobile trading applications.
- An exponential growth in new retail brokerage accounts was observed during the lockdown, highlighting the increased interest in investing.
- A significant shift from trendy app-based platforms to traditional brokerage firms draws attention to a changing investment landscape.
- The sustainability of this surge of new retail investors post-pandemic may reshape future investing paradigms.
The global pandemic and the financial sector are more closely related than one might initially assume, with the connection between the two strikingly visible in the sector of retail investment, who has undergone a transformative shift alongside the global health crisis. This transformation into a popular pastime has largely been fuelled by the implementation of government stimulus checks and the innovation of user-friendly mobile trading platforms, successfully breaking down barriers that once elevated investing into an elitist activity.
The sweeping distribution of stimulus checks by the government intended to soften the economic shock of the pandemic, inadvertently ignited an investment uprising. For the first time, entry into the investment world was made more accessible through the allocation of available funds. A notable acceleration in the speed of the M2 money supply has been recorded by the Federal Reserve Bank, underlining the impact of fiscal policy during this period. Additionally, the U.S. Bureau of Economic Analysis recorded a substantial rise in the personal saving rate, skyrocketing from 7.6% in 2019 to an unprecedented 33.7% in April 2020. These funds, set aside for survival, offered ambitious individuals a golden opportunity to venture into new markets and test their luck in investments. Paired with a simultaneous decrease in expenditures due to pandemic-related lockdowns, these resources eventually trickled into equities and stocks.
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