This was the concluding predictive sentence of our previous yearly outlook:
“The watchword is adaptation.”
We based it on the move into zero commissions and a prediction that US GDP and equity markets would grow. The irony is that we could not have predicted Covid-19, and yet the admonition of “adaptation” as the watchword could not have been more accurate. Markets adapted.
Even in the context of Covid-19, massive adaptations took place. First, market participation saw a shift from institutional money to an increased proportion of retail liquidity. This trend is sticky – it has legs. Nasdaq has even launched a Retail Trading Activity Tracker. Second, this shift increased the demand by individual investors for greater market information and analysis.
This demand to trade, accompanied by technology that both enables and shifts the nature of trading, will continue to have significant impact on markets – especially as these technologies appeal to younger, tech savvy individual investors. The question is: how will investors leverage and participate in these trends?
Here are the sentences for this year’s outlook:
- Tools that find opportunities, where no one is looking and before others find them in volume, are in desperate need by the world’s retail investors.
- An increasing degree of volatility over the next 12 months will make access to such opportunities and their risk mitigation critical to survive.
With these shifts, issuers will need to develop new strategies on the release of material information about their firms, and investors will need reliable and responsible analytics around each stock. The information equation is critical as it has a significant impact on stock price. Corporations will seek to not only release information but provide the “good housekeeping seal” that the information that is public has in fact been issued either by the corporation or vetted by investment analysts. The recent Gamestop experience clearly indicated the need for this type of regime. After all was Reddit on Gamestop news or an event? In either case, price was impacted.
Analytics and information that drives better decisions on all US equities, delivered efficiently and via device, will shift from “nice to have” to “must have”.
When we consider these changes that will continue as we emerge from Covid-19, global individual investors will have an exponential need for analytics with embedded risk management. The world is starved for the information that gives them a level playing field over others with big wallets who can purchase information, analytics, and risk mitigation.
Here, firms working with AI exceed the need in identifying investment opportunities while simultaneously providing risk tolerances on when to enter and exit particular stocks and strategies – satisfying the performance equation.
By incorporating advanced AI and machine learning tools investors are ideally positioned for the challenges in the year ahead – which will enhance the quality of their trading and provide the possibility of staying ahead of the changes coming to markets.
Visit Trade Ideas for additional insight on this topic: https://www.trade-ideas.com/.
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