A version of this story first appeared in CNN Business’s Before the Bell newsletter. Not a subscriber? You can sign up here. You can listen to an audio version of the newsletter by clicking on the same link.
Reddit investors have been the butt of many jokes over the past few years, but could these much-maligned meme traders have the last laugh?
A surprising new survey finds that 58% of institutional investors — the professionals who act on behalf of banks and pension funds, the so-called “smart money” — admit to making an investment decision based on information from Reddit.
Of those familiar with the popular gossipy social media site, 46% of those surveyed expect to use the platform more in the coming year, and about 50% thought Reddit was of “high importance” in stock evaluations, the Brunswick Group reported. Institutional investors also cited Twitter and TikTok as useful platforms for investing in research.
This radical shift in information gathering comes as an influx of retail investors, day traders and outright amateurs into the pandemic era, revolutionizing the way Wall Street functions.
What is going on: Private investors are pouring a record $1.5 billion a day into the stock market, according to data from Vanda Research. Companies are paying attention, and so are institutional investors. As Main Street traders increasingly control the markets, it has become increasingly important for professional investors to stay on top of what they are up to.
“Institutional investors are encroaching on traditionally retail-focused online spaces,” Brunswick analysts wrote. “This increased interest in retail investors could be a result of the financial ramifications of popular ‘meme stocks’ such as GameStop, AMC and Bed Bath & Beyond as institutional investors look for ways to keep up with the conversation among retail investors .”
The overlap between institutional and retail investors is not limited to Reddit and social media. Robinhood Snacks was ranked as the most subscribed newsletter by the institutional investors interviewed.
Brunswick has conducted its annual survey of institutional investors’ digital habits for more than a decade. This year it surveyed 257 institutional investors in North America, the United Kingdom and the European Union.
Private investors accumulate money and power: Private investors now account for half of all wealth worldwide, according to a recent report from Bain & Company. That rise in power has led companies to structure investment products that attract these individuals, accelerating convergence between the retail and institutional worlds.
At the same time, private investors have gotten smarter and are doing their own research. According to research from investment platform Public, about 63% of private investors spent more time on equity research in February than in the same month last year.
Meanwhile, institutional investors seem to be embracing the meme world. Hedge funds recently disclosed in filings that they increased their holdings of GameStop by about 15% in the past quarter.
▸ Two major jobs reports were released on Wednesday and the results were, annoyingly, contradictory.
The number of job openings in the United States fell to 10.8 million in January, compared to an upwardly revised 11.23 million in December, the Bureau of Labor Statistics reported Wednesday as part of its monthly Job Openings and Labor Turnover Survey, or JOLTS. .
At the same time. According to ADP, private companies added more jobs than expected in February. The payroll company estimated it added 242,000 jobs last month, surpassing its forecast of 200,000 and more than double the revised 119,000 added in January.
Investors and the Federal Reserve will be looking for more clarity on the state of the labor market in the official jobs numbers due Friday morning.
Fed officials have expressed concern that a tight labor market could keep upward pressure on wages and thus inflation.
▸ The gap between home seekers and actual homes widened considerably last year. New data shows the U.S. housing market is now 6.5 million homes short.
The pace of total housing starts slowed in 2022, while completions increased. About 1 million single-family homes will have started in 2022, which is 10.6% less than in 2021, but still more than in any other year as of 2012.
Want to dig deeper? Watch Before the Bell’s interview with David O’Reilly, CEO of real estate developer Howard Hughes Corp.
▸ My colleague Brian Fung reports: US Senators said Wednesday that bipartisan support is growing for the review of a federal law known as Section 230 of the Communications Decency Act, which essentially grants immunity to technology platforms and websites regarding what they publish .
“Here’s a message to Big Tech: Reform is coming,” said Sen. Richard Blumenthal, who chaired a technology subcommittee hearing to consider legislative changes.
Lawmakers from both sides praised the Supreme Court for considering Section 230 when it heard Gonzalez v. Google, a case about whether YouTube can be sued for algorithmically suggesting terrorist-created videos to users.
The case could have major implications for how social media sites rank, present and promote content online.
But the senators said that however the Court rules, it’s up to Congress to rewrite the law so members of the public can take platforms to court and hold them accountable.
Federal Reserve Chairman Jerome Powell concluded his second and final day of Congressional testimony with a relatively uneventful three-hour hearing before the House Financial Services Committee on Wednesday.
But there was one notable moment: Representative William Timmons asked a question about the trillion dollar coin. That’s the far-fetched potential solution to the debt ceiling crisis in which the president issues a $1 trillion platinum coin, deposits it with the Federal Reserve, and allows the government to continue paying its bills.
“There are no rabbits that can be pulled out of hats here,” said Powell when asked if he would accept the coin. “That would be a rabbit coming out of a hat.”