Investing.com -- JPMorgan analysts believe that the U.S. stock market correction observed during February and March was primarily driven by institutional, rather than retail, investors.
According to JPMorgan (NYSE:JPM), "The decline in the share of retail investors in U.S. equity trading during Feb/Mar suggests that it was institutional rather than retail investors that were mostly responsible for the equity market correction and the heightened trading volumes at the time."
JPMorgan notes that the share of retail investors in U.S. equity trading has been "mean-reverting rather than trending up over the past five years" after a significant increase post-pandemic.
The historical peak of "31% in December 2020 has yet to be breached," they wrote in a note to clients on Thursday.
In the more recent period, from May to June, JPMorgan observes that "the retail impulse subsiding."
Instead, the equity market has been primarily propelled by other forces. "With equity-focused hedge funds having rebuilt their equity exposures from April already, it has been mostly corporates via share buybacks as well as macro hedge funds and CTAs that propagated the equity market over the past month."
Looking at momentum-driven hedge funds, such as CTAs, JPMorgan indicates that they are "already significantly long equities in our framework," buyt they "still have room to propagate the equity market before they reach overbought territory."
In a separate observation, JPMorgan notes that Euro area banks and active Euro bond mutual fund managers "appear to be shorter duration than U.S. banks" and U.S. active bond mutual fund managers, respectively.
This dynamic "could provide support for Euro duration vs. U.S. duration." Lastly, the analysts mention that the "anticipation of a favorable U.S. regulatory environment is inducing more crypto IPOs and VC funding."
