Retail traders lose their market-beating streak
Goldman Sachs’ basket of retail-investor favorites has slipped behind the S&P 500 on a 52-week basis after a strong run since May.
By Frankie Delgado · News Reporter
2 min read
Retail investors’ favorite stocks have lost their edge over the broader market, according to Goldman Sachs data reported by MarketWatch.
The bank’s basket of stocks popular with individual traders is now trailing the S&P 500 over the past 52 weeks for the first time since early May. The turn comes after a strong two-month stretch in which the retail-favorite group beat the wider market by as much as 10 percentage points, according to the report.
The move is not a wipeout. Goldman’s retail basket has gained 14% over the 52-week period, MarketWatch reported, while the S&P 500 has advanced 20% over the same span.
Momentum cooled fast
Technical signals had flashed a warning near the end of May. Goldman data cited by MarketWatch showed the basket’s relative strength index, a momentum gauge watched by traders, rose above 70, a level often associated with overbought conditions.
The RSI topped out at 74.88, according to the Goldman figures. It has since dropped to 37.86, which remains above 30, the level often associated with oversold conditions.
That swing helps explain how a crowd-favorite trade went from hot to lagging in a matter of weeks. The retail basket had been running ahead of the market, then cooled as the S&P 500 kept gaining more over the full-year window.
Tech-heavy favorites
Goldman created the basket in 2020, according to MarketWatch. The bank updates it every quarter using an analysis of retail trading flows.
The current mix leans heavily toward technology names. MarketWatch identified CrowdStrike, Advanced Micro Devices and Micron Technology as notable holdings. Semiconductor and equipment stocks account for close to one-fifth of the basket.
That tilt matters because retail investors are light in some areas that have been performing well. MarketWatch reported that the basket is underweight financials and has little healthcare exposure, while both sectors have been breaking out.
The valuation picture is less harsh. On a price-to-earnings basis, the basket trades at 22.3 times expected earnings for the next 12 months, according to the report. MarketWatch said that is moving closer to 20.6 times, a level that would put the basket in its 10th-lowest percentile.
For now, the scoreboard has flipped. Retail traders’ favorites are still up over the past year, but Goldman’s data show they are no longer ahead of the S&P 500.
This story draws on original reporting from MarketWatch.