Customers putting more 'buy' orders than 'sell' for stocks and ETFs

At the end of last year, oil and the Russian ruble crashed, the VIX volatility index doubled, and US stocks dropped 5 per cent from their high — all circumstances that normally shake an investor’s confidence. Not this time, though: New data from Fidelity shows that while the world panicked, many individual investors in the US were buying stocks. On the one hand, this is good news: Buying during a pullback is generally a good strategy in a rising market. On the other hand, it's unusual for individual investors to do what they’re supposed to. Those kinds of good habits don't usually kick in until the market's climb has nearly run its course — which suggests that the good times may be drawing to an end.

An analysis of Fidelity's 15 million retail brokerage customers shows that, in the tumultuous first two weeks of December, customers put in 34 per cent more "buy" orders than "sell" orders for stocks and exchange-traded funds. Their buying in the first half of December was 9 percentage points higher than in November and 20 percentage points higher than in the rest of December, when markets were far calmer. They bought by about the same margin in October, the most volatile month of the year for US stocks. By December 29, the S&P 500-stock index was back to its alltime high.

Hunting for values in market downturns can be a smart strategy. "If there’s a pullback, they find opportunities," Ram Subramaniam, president of Fidelity’s brokerage unit, says. On the other hand, investors are helping to prop up a market that’s been rising steadily for six years. A legitimate worry is: How many more times can stocks bounce back before the bull market ends?