Retail Traders Respond to Selloff By Buying Oil, Options and Meme Stocks

Market volatility is giving retail traders whiplash, and there’s little consensus among the meme-stock set on how to react.

After two years of stimulus-fueled gains, stocks are getting hammered, with surging inflation, rising interesting rates and a tumultuous earnings season conspiring to keep markets weak.

Both the S&P 500 and the Nasdaq 100 have fallen for four consecutive weeks, and the S&P’s 8.8% drop last month marked its worst April performance since 1970. The tech-heavy Nasdaq slumped 13% for its worst month since the financial crisis in 2008.

New investors, flush with cash and bored at home, piled into stocks during the pandemic. They’ve have faced tests before, such as the selloff earlier this year prompted by Russia’s invasion of Ukraine, but none of them have encountered this unique combination of 1980s-level inflation, rate hikes and a dismal outlook for risk assets.

In fact, about 60% of respondents in a recent survey from Allianz Life are worried that a recession is around the corner, and 56% fear another big market crash.

Although some are fleeing stocks, with equity funds suffering their longest streak of withdrawals since August 2020, retail investors have yet to post a large-scale exodus. Instead, everyone is looking to different strategies to curtail the pain.

Here are some of the ways they’re reacting: