A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.
Reddit investors have been the butt of many jokes over the last 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 trade on behalf of banks and pension funds, the so-called “smart money” — admit to having made an investment decision based on information from Reddit.
Of those familiar with the popular, gossipy social media site, 46% of those polled expect to use the platform more in the next year and about 50% considered Reddit to be of “high importance” in stock evaluations, reported the Brunswick Group. Institutional investors also cited Twitter and TikTok as helpful platforms for investing research.
This radical shift in information-gathering comes as a pandemic-era influx of retail investors, day traders and outright amateurs revolutionizes the way Wall Street functions.
What’s happening: Retail investors are pouring a record $1.5 billion per day into the stock market, according to data from Vanda Research. Corporations are paying attention, and so are institutional investors. As Main Street traders’ gain sway over markets, it has become increasingly important for professional investors to keep abreast of what they’re up to.
“Institutional investors are encroaching on traditionally retail-oriented online spaces,” wrote analysts at Brunswick. “This increased interest in retail investors could be a consequence of the financial fallout from popular ‘meme stocks’ like GameStop, AMC, and Bed Bath & Beyond as institutional investors look for ways to keep their pulse on the conversation among retail investors.”
The overlap between institutional and retail investors isn’t limited to Reddit and social media. Robinhood Snacks was ranked as the most-subscribed-to newsletter by the institutional investors interviewed.
Brunswick has conducted its annual survey on the digital habits of institutional investors for over a decade. This year, it polled 257 institutional investors across North America, the United Kingdom, and the European Union.
Retail investors amass funds, and power: Retail investors now account for half of all wealth globally, according to a recent report by Bain & Company. That surge in power has led companies to structure investment products that attract these individuals, accelerating the convergence between the retail and institutional worlds.
At the same time, retail investors have become more savvy and are conducting research of their own. About 63% of retail investors spent more time researching stocks in February than they did during the same month last year, according to research by investing platform Public.
Institutional investors, meanwhile, appear to be embracing the meme world. Hedge funds recently disclosed in filings that they had increased their holdings of GameStop by about 15% over the last quarter.
Jobs, housing and a warning to Big Tech
▸ Two important jobs reports were released Wednesday and the results were, annoyingly, contradictory.
The number of job openings in the United States fell to 10.8 million in January, down from 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. private businesses added more jobs than forecast in February, according to ADP. The payroll company estimated that 242,000 jobs were added last month, higher than the forecast of 200,000 and more than double the revised 119,000 added in January.
Investors, and the Federal Reserve, will be looking for greater clarity on the state of the labor market in the official jobs numbers due out Friday morning.
Fed officials have expressed concern that a tight labor market could keep upward pressure on wages and, in turn, inflation.
▸ The gap between home-seekers and actual homes widened significantly last year. New data shows that the US housing market is now short 6.5 million homes.
The rate of overall housing starts slowed in 2022 while completions climbed. In 2022, roughly 1 million single-family homes were started, which is 10.6% fewer than in 2021, though still more than in any other single year back to 2012.
Want to dig deeper? Check out Before the Bell’s interview with David O’Reilly, CEO of the real estate developer Howard Hughes Corp.
▸ My colleague Brian Fung reports: US senators said Wednesday that bipartisan support is growing for revising a federal law known as Section 230 of the Communications Decency Act that essentially grants immunity to tech 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 changes to the law.
Lawmakers from both parties 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 repercussions for how social media sites rank, present and promote content online.
But the senators said that, however the Court rules, it is up to Congress to rewrite the law so that members of the public can take platforms to court and hold them accountable.
Rabbits, hats and the debt ceiling
Federal Reserve Chairman Jerome Powell wrapped up his second and final day of Congressional testimony with a relatively uneventful three-hour hearing in front of 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 where the president issues a $1 trillion platinum coin, deposits it with the Federal Reserve, and allows the government to keep paying its bills.
“There are no rabbits to 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.”