What should we make of all this “poker/sports gambler cum day trader” talk? Not much.

GLC 2020 Mid-Year Capital Market Outlook:

Plenty of ink is being spilt wondering whether the runup in stock markets has been fueled by a new breed of online gamblers and sports bettors (faced with closed casinos and precious few live sports to bet on) turning into stock market day traders.

Surging New Accounts at Online Brokers

The COVID-19 pandemic and pause on sports gambling may have increased interest in day trading with online brokers. Charles Schwab reports 609,000 new accounts between Q1 2019 and Q1 2020 (a 58% increase). TD Ameritrade and Etrade report 149% and 169% increases respectively.

The data might look compelling with online brokers reporting large year-over-year increases in new account openings and stock trading app, Robinhood, reporting a massive three million new accounts in the first quarter. However, the lesson to learn from these self-proclaimed ‘legends of investing’ is clear: gambling in moderation can be entertaining but be certain to understand that what they’re doing is gambling – not investing. Even the founder of Barstool Sports, Dave Portnoy, admits to owning just one stock in his life before the quarantine hit. He warns people, “I’m not a financial advisor. Don’t trust anything I say about stocks.” His response when asked if he’s beating the market? “I don’t know. I’m probably not because I took such a big dip in the beginning.” These behaviours make for a great media frenzy, but the stock market is not a casino. Sure, in the short run, emotions, sentiment and momentum can drive prices and a few people might profit from a few good bets. But capital markets fulfill their important role as efficient allocators of capital in society over the long run, ultimately rewarding the silent majority of patient long-term investors. Furthermore, within capital markets, active investment managers like GLC play an important role: employing our expertise, rigorous research and disciplined processes are an important ingredient in the proper functioning of capital markets. Our goal is to find profitable opportunities; we do this by allocating capital efficiently and effectively. The profit incentives behind this capital deployment are an important driver of risk taking, innovation and growth that benefits both our investors and society as a whole.

GLC 2020 Mid-Year Capital Market Outlook:

Copyright 2020 GLC. You may not reproduce, distribute, or otherwise use any of this article without the prior written consent of GLC Asset Management Group Ltd. (GLC).

This commentary represents GLC’s views at the date of publication, which are subject to change without notice. Furthermore, there can be no assurance that any trends described in this material will continue or that forecasts will occur; economic and market conditions change frequently. This commentary is intended as a general source of information and is not intended to be a solicitation to buy or sell specific investments, nor tax or legal advice. Before making any investment decision, prospective investors should carefully review the relevant offering documents and seek input from their advisor.