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Kelly Evans: This trading boom is for real

CNBC's Kelly Evans
CNBC

Who would have thought a global pandemic would send a flood of new investors into the stock market? But that's exactly what's happened this year, and it's looking like this new breed of retail investor is here to stay. 

Driven by zero-cost trading, stimulus checks, a lack of sports to bet on, few other diversions and a stock market that has surged off its lows in March, retail trading has doubled from last decade to nearly 20% of total trading volume this year, according to the Wall Street Journal. Roughly ten million new trading accounts have been created since January, half at Robinhood; we haven't seen young people this interested in the stock market since the late '90s.  

And it's come just when the market would seem to need it the most. 

The biggest and in some cases the only reliable buyers of equities during the last expansion were companies doing share buybacks. They are mostly hamstrung now, needing their cash for other uses including paying off the debt accumulated to get through the pandemic. The loss of that buying power would seem to be a major restraint on the market this time around, but not for retail investors stepping up in a big way.  

But will it last? That's the biggest question Brian Reynolds at Reynolds Strategy has been getting from clients about this boom, and his answer is, yes, actually: "After sitting out the stock market for 20 years, seeing their tax money go to bailout after bailout, seeing stocks rise during a pandemic...and being confronted with historically low yields, retail investors are beginning to shift toward stocks again the way they did in 1995," he wrote this week. Meaning that this trend can easily last another three to five years, he thinks.  

And recent actions by the big players in this space would seem to bear that out. Fidelity just announced it plans to hire 4,000 people in the next six months, plus is recruiting 1,500 college students for internships and full-time work. Morgan Stanley is buying Eaton Vance after snapping up E-Trade earlier this year, as it continues to pivot from Wall Street to Main Street. BlackRock--a major institutional player--said it's been capturing more retail money, too.  

But as a result, be on the lookout for stocks to behave a little differently throughout this recovery, Reynolds warns. Call option activity, a main way today's new investors are playing the market, "has grown this year so that it is having a noticeable impact on more than 40% of large cap stocks," he says. He also sees an impact on the major ETFs for oil, energy, silver, gold, and solar.  

It's too soon to know exactly how this will all play out--and that's the point. Far from nearing the end of this retail trading boom, we're still only just at the beginning.  

See you at 1 p.m.  

Kelly

Twitter: @KellyCNBC

Instagram: @realkellyevans