When the rout in technology heavyweights like Facebook Inc. (FB), Amazon.com Inc. (AMZN) and Alphabet Inc. (GOOGL) spilled over into the broader market in late March, many feared that individual investors would flee for the exits, exacerbating the declines.
Instead, Alex Boucher, a 22-year-old college student in Westfield, Mass., added to his position in chip maker Nvidia Corp. (NVDA), seeing a chance to pick up the pricey stock at a discount.
Finding alternatives to the FAANGs
San Jose, Calif.-based contractor Michael Chu, 34, shrugged off a $2,700 loss in his tech-heavy index-fund holdings, betting the technology selloff was “just one of those downturns that will pick back up.”
And in Dallas, portfolio manager Craig Hodges took only two phone calls from clients on a day when the Dow Jones Industrial Average (.DJI) fell nearly 500 points, a pittance compared with the 10 to 15 investors he would hear from daily at the peak of the 2008 financial crisis.
It isn’t that investors aren’t worried about the stock market: Roughly 37% of individual investors expect stocks to fall over the next six months, according to an American Association of Individual Investors survey, the highest share since September. And it isn’t that individuals don’t own technology shares, either: As investors have loaded up on index funds, many are more exposed to the tech sector than ever.
Instead, interviews with individuals and financial advisers around the U.S. show that many are largely riding out the market’s turmoil—citing the belief that technology stars will be able to weather the latest controversies hitting the industry, the sense that the market has fallen so far that they ought to wait out the recent wave of selling, and the difficulty of timing prior market peaks and troughs.
Despite the recent declines, trading activity has been relatively orderly, with volumes at discount broker Charles Schwab Corp. (SCHW) 36% lower than what they were during the peak of the February selloff, and none of the brokerages appearing to suffer a repeat of February’s outages and slowdowns.
“I don’t think there’s a sense of panic,” said JJ Kinahan, chief market strategist at TD Ameritrade.
One possible reason is that as large, one-day stock swings have become more common, they have also become less unnerving to investors. The S&P 500 (.SPX) has closed up or down at least 1% on 26 occasions so far this year, blowing past last year’s tally of eight.
Many individuals are also skeptical that the controversy recently hitting a number of technology giants will ultimately lead to tighter regulations that could affect the firms’ profits.
“President Trump tweets directed at companies such as Boeing (BA) haven’t had any negative actions against them, so I think this is all talk,” Mr. Boucher, the college student, said of President Donald Trump’s recent tweets blasting Amazon.
Tech stocks in the S&P 500 have fallen 6.5% in the past month, after powering the broad index higher for more than a year. The NYSE FANG+ index, which tracks 10 global tech heavyweights, including Facebook, Amazon, Apple Inc.(AAPL), Netflix Inc. (NFLX) and Google parent Alphabet, has dropped more than 10% over the same period.
Some market observers note many investors have been conditioned to step in and buy assets whenever prices drop. That is because no decline, including the tech-bubble burst or the financial crisis, has lasted forever. They worry that mentality could point to an underlying complacency that will end with a big selloff.
“What happens in bull markets is that pullbacks become smaller and smaller,” said Lee Caleshu, chief investment officer at Halite Partners in Columbus, Ohio. “That works until it doesn’t.” In particular, he said he is concerned about the concentration of technology stocks in the market, as well as the potential regulatory risks facing companies like Facebook, Amazon and Tesla Inc. (TSLA).
Many individuals have taken a more active hand in their portfolios as stock selling has intensified. At Charles Schwab, trading in the last week of March was the busiest since the week of Feb. 5, when the S&P 500 slumped into correction territory, a slide of more than 10% from its all-time high.
Activity also picked up at TD Ameritrade Holding Corp. (AMTD), which noticed names like Micron Technology Inc. (MU) and Intel Corp. (INTC)—usually less popular than the FAANGs—ranking among the top five most-traded stocks some days as recent trade tensions spurred fears that semiconductor firms could get hit by retaliatory tariffs.
Floyd Saunders, a 68-year-old investor in Newton, Kan., was one of the sellers. Mr. Saunders said he sold all of the technology investments in his Stash online brokerage account—about 30% of his portfolio—at the beginning of March. “I’m waiting for things to settle down,” he said. “I was exiting tech before the Facebook and Amazon stuff really blew up…when volatility settles back down, I’ll get back in.”
Still, Stash, which offers sector-specific funds and lets investors buy fractions of shares in individual stocks, said purchases in March of individual stocks and ETFs in the technology sector outpaced sales by 160%.
Louben Repke, a 27-year-old personal trainer in Annapolis, Md., said: “If I was actually down, I’d be more worried.” After seeing his portfolio surge 30% last year, thanks to a global rally that lifted everything from U.S. stocks to bonds to commodities, he isn’t fazed by the stock market’s recent 10% pullback.
“I have nothing to lose sleep over,” Mr. Repke said. “I think we’ll all be fine.”
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