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Bitcoin and Cannabis Opportunities Lure Millennials to Markets

January 30, 2018

In the past several weeks, retail investors, particularly millennials, have been pouring money into the stock market after missing out on much of the nine-year bull market, the Wall Street Journal writes. But whether this surge is a precursor of another market rally or a sign of the end of a long bull market streak remains to be seen, according to the paper.

In the week through Jan. 24, investors put $33.2 billion into ETFs and global mutual funds, the largest inflow for any comparable period since 2002, according to Bank of America Merrill Lynch data cited by the paper.

Discount brokers Charles Schwab Corp., ETrade Financial and TD Ameritrade all had spikes in client activity in the last quarter of 2017 and the surge sped up this month, the Journal writes. Schwab had a 29% rise in retail business in the fourth quarter compared to the year prior, and a 36% jump in new retail brokerage account openings, Schwab chief executive Walt Bettinger said, according to the paper. For Etrade, trading activity in November and December marked two of the three biggest months in the firm’s history, the Journal writes. And Ameritrade had a record number of new accounts opened in the fourth quarter, helped in large part by a 72% increase in new accounts among millennials, according to the paper.

But many of the investors entering the market are doing so driven by interest in particularly speculative areas, the Journal writes. Ameritrade’s Chief Executive Tim Hockey tells the paper the increase in new account openings is driven by interest among first-time investors in cryptocurrencies and cannabis.

ETrade chief executive Karl Roessner said in an earnings call last week that around a 10th of the firm’s daily average revenue trades in January were tied to blockchain or cannabis, according to the Journal. Meanwhile, an Etrade spokesman tells the paper the firm doesn’t even plan to allow its clients to trade cryptocurrencies, while Ameritrade and Schwab didn’t comment on their plans. Merrill Lynch has banned trading in Bitcoin and its derivatives, as have Wells Fargo & Co., the Royal Bank of Canada and Morgan Stanley.

It’s still unclear what this spike in investor interest — and particularly in risky investments such as Bitcoin and cannabis — means for the markets, according to the Journal. On the one hand, it could mean these weeks are the “earlier days of a new cycle as economic growth picks up,” Devin Ryan, a brokerage analyst and managing director at JMP Securities LLC, tells the paper. On the other hand, it could mean the end days of the years-long bull market, he says, according to the Journal.

By Alex Padalka
  • To read the Wall Street Journal article cited in this story, click here.