Individual investors impact on Wall Street

Yahoo Finance's Julie Hyman, Brian Sozzi, Jared Blikre, and Myles Udland break down the increase in retail investors jumping into the stock market.

Video transcript

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- This is a Yahoo Finance special, "Reshaping the Market." It's a modern-day David versus Goliath-- small investors versus Wall Street titans. Non-professional traders are upending the stock market in ways we've never seen before.

GAVIN: I've learned a lot from the other members of the community in the past seven months, and I believe they are some of the smartest people in the market. I believe that they should be on Wall Street, not the people on there currently.

BECKY: Wall Street pros who say that we don't know what we're doing can't possibly understand our non-financial strengths.

- Armed with unprecedented access to market information, free trading, and the temptation of potentially explosive returns, individual investors have emerged as a new force in finance.

- AMC was on the verge of bankruptcy, but because the stock price went up and they were able to raise so much money, the company itself actually used that money to help them get out of the red. And so that's been a really positive consequence to this whole movement.

- This is a movement that has found its voice, rallying on social media and, in some cases, beating the market pros at their own game. Join us now for this Yahoo Finance special, "Reshaping the Market." Hello, and welcome to our special on the huge influence that individual investors are having on the stock market, from powering individual issues-- we've talked about them a lot-- AMC, GameStop-- to also lifting the overall market to record highs. Joining me now, my colleagues Miles Udland, Brian Sozzi, and, from the floor of the New York Stock Exchange, Jared Blikre. Welcome, everyone.

Jared, I want to start with you and your thoughts there. I mean, you are a long-time market watcher, long-time trader yourself, watched the technical levels. How has this felt to you, this period of time, as we've seen this big, big increase in retail interest?

JARED BLIKRE: It's been incredible, and I think it is unprecedented. I was not trading during the NASDAQ bubble. I certainly wasn't trading during the 2009 bubble. But I think there are some similarities.

But you combine this with the fact that there's been this migration towards electronic trading over the last 20 years-- 25 years, actually-- and the market structure has really changed. And as we were learning during the intro, this has affected the company's ability-- if you're a meme stock, it allows you to go into the capital markets and raise money. So there is a direct relationship now between the investor and the company that really didn't exist before.

Then you have all the other dynamics. You have hedge funds that are shorting stocks, collapsing-- $30 billion Archegos was one day. Two days later, it was zero. These people, these traders, the retail army are having an effect on the markets, and it's palpable. And I don't think it's going away.

You take a look at AMC year-to-date, GameStop year-to-date, all right, we had those spikes before, but it's incredible the price levels that they've been able to hold. So this isn't a pump-and-dump scheme; this is simply an investment scheme, and it's a new paradigm.

BRIAN SOZZI: Jared, well, this is something we'll explore throughout the special today, but where have all these traders gone the past three months? It was a phenomenal spike in trading activity in January, but things have cooled down, and so are some of the big stocks that became synonymous with the uptick.

JARED BLIKRE: Yeah, I think a lot of activity has fallen into more concentrated hands right now, and the effect that retail investors are having on the market tend to be in those names. So the ones we've been talking about-- AMC, GameStop-- but interestingly, a few new ones have popped up like Newegg, and I think that's evidence that this isn't a one-time phenomenon.

So there's-- everything happens in cycles. There's an interest, and you see the stock price accelerate. There's a short squeeze-- and that's important, because when the shorts get squeezed out, a lot of times, you just have that collapse back to reality, and then the stock meanders and goes on its way. Not necessarily the case with a lot of these stocks. They're holding their gains, and that's why I think this is a little bit different.

- And I think you also can't forget about, to some degree, crypto and its role in all of this in terms of retail investors being interested. We saw a resurgence in crypto-- one of many, of course-- but that's part of the whole phenomenon as well, even as we've gotten into this period where things have been a little quieter on the meme front.

MILES UDLAND: Yeah, and another thing to remember in all this is that the number of companies that are listed on the public markets has been collapsing over the last several decades, right? There's been fewer options for investors of all sizes to choose from, and on the backdrop of that is the traditional financial industry of you get some analysts, they cover some stocks, they give you stock ideas, they call some dentists, and then they buy the stocks-- I mean, that's been dying.

That is dying. It's a dying business. BlackRock and Vanguard are killing traditional Finance in many ways. And so to see retail investors, I think, end up with a more even footing-- not only because the internet democratizes information, the internet has democratized access to training, and obviously, there's a conversation around what that access looks like-- with the Robinhood IPO, so on and so forth, we'll talk about that forever-- but I think that we have this weird scenario where retail now has more of a voice than they've had in some decades at the same time that the actual hedge fund world that they're apparently fighting against is in collapse. Performance has been terrible. They've underperformed the market. They're getting allocations pulled. It's all about private equity now instead. And so I think it's an interesting duality there.

- Yes, it is, although in some cases, the hedge funds are now chasing the retail performance.