Trading is back, another big beneficiary of a Trump win: many brokerage firms, stock exchanges and asset managers are up double-digits this week.
Stock volumes on Wednesday and Thursday were twice normal. TD Ameritrade's CEO, Tim Hockey, was on our air this afternoon, noting that the big volatility this week and particularly on election night "drove new investors and traders onto the platform." New accounts almost doubled the normal rate, he said.
After years of low volume and retail accounts fleeing, the trading community has suddenly gotten excited again.
Brokerage firms like E-Trade, Charles Schwab, and TD Ameritrade are flying this week, up double digits. There's three reasons for the rally:
1) A broad stock market rally helps them. "These are high beta stocks, so when the markets go up, you would expect them to go up even more," said Rich Repetto, who analyzes the brokerage and exchange community at Sandler O'Neill. "When markets go up, these firms go up even more."
2) When volume goes up, they benefit because they charge for trades. "People are trading more, so they are getting an earnings boost," Repetto explained. "Their fundamentals are improving."
3) Higher rates are also a benefit. They own banks that take the cash from trading accounts and invest it along the yield curve.
Exchanges like ICE and CME are also up double digits on hopes for higher trading.
Asset managers like Legg Mason and Waddell & Reed are also up for similar reasons, but there's an additional factor: hopes the much-hated Fiduciary Standard Rule will be repealed. That rule would require fiduciaries to put client interests ahead of their own, which everyone agrees is a good idea. But it also opens the door to the potential for large numbers of what may (or may not) turn out to be frivolous lawsuits that could bog the entire industry down for years.
Expect this to be a top priority for Trump's financial market team.
Now comes the hard part: getting the average American to buy more stocks. We all know that the number of households that own stocks has declined, which means stock ownership has become even more concentrated. The top 10 percent of households own the majority of stock.
The investment community would really love to change that.