The Lower, The Better?

Low priced stocks have outperformed thus far in 2021. The lower-priced the better the performance. Why is this occurring?

I submit that it is evidence of the growing presence of newly minted retail investors attracted to the markets by beginner-friendly trading apps and zero commissions. Retail investors with small accounts have historically been attracted to low-priced shares because of their affordability and by the perception that owning more shares will enhance returns.

The presence of retail buying is not only being felt by low-priced shares, by in the options market through a great increase in the purchase of calls.

The recent strength of low-priced shares and demand for IPOs and call options will be recognized as telling signals for those who remember the internet bubble at the turn of the century.

Current market behaviour is consistent with our expectation that the 2020s will be a notably volatile decade with great risks. We also see great opportunities, but not in the areas currently favoured by consensus opinion.

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