Individual investors’ exuberance about the stock market isn’t expected to slow any time soon.
Households are expected to buy $400 billion of U.S. equities on a net basis this year, strategists at Goldman Sachs said in a recent note, a level that would trounce the $367 billion the group purchased in 2020.
“High cash balances and continued retail participation in equity markets should bolster household equity demand,” Chief U.S. Equity Strategist David J. Kostin and a team of analysts said in a note published Friday. “The tradeoff households face between equities and other asset classes favors equities through year-end given anemic money market and credit yields.”
Already in the first quarter of this year, the note said, households were the largest source of equity demand, with net purchases of $172 billion. Goldman estimates that households currently allocate 44% of their assets to equities, slightly below the all-time-high of 46% reached during the dot-com era of 2000.
Individual investors have piled back into the U.S. stock market lately after taking a breather earlier this spring. In its Friday note, Goldman said a basket of stocks favored by individual investors has outpaced the S&P 500 by 3 percentage points this month.
Still, Goldman said it expects corporations will be the largest source of equity demand for the remainder of 2021, as it expects “buybacks to accelerate and issuance to slow from peak [first quarter] levels.”