Exclusive: Gen Z skips the dip while boomers buy
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Gen Z is not buying the dip, while boomers are, per the latest Charles Schwab STAX index, which analyzes the trading activity of millions of customers.
Why it matters: There is a generational divide in dip buying, as younger investors appear to be skittish as their riskier investments start to fade.
What they're saying: There is "less stepping back into the market from Gen Z" than Gen X because of the volatility in riskier assets, Joe Mazzola, head trading and derivatives strategist at Charles Schwab, tells Axios.
- Gen X was "more aggressively positioned toward some of the Mag 7," he says, while Gen Z leaned more into bitcoin and short-interest assets that are now down for the year.
- That underperformance of high-risk assets may have pushed Gen Z investors to stop buying the dip as ferociously, even as their Gen X counterparts kept their focus on the Mag 7 stocks.
Between the lines: The STAX report, shared exclusively with Axios, covered client activity through October. It indicated "tremendous buying," especially on the final day of the month despite the recent pullback from Gen Z.
- AI and megacap names were popular to end the month, driven in part from the Meta and Microsoft selloffs following their earnings reports.
Zoom in: Net selling was highest in tech, which could be a bearish sign.
- Popular buys were Meta, Nvidia, Microsoft, Amazon and Palantir.
- Some names net sold were AMD, Apple, Intel, Tesla and Eli Lilly.
- The popular buys are firms with "solid balance sheets," Mazzola notes.
- The stocks sold did pretty well over the past month, which indicates clients were trimming into strength. That could "show there is some discipline" among novice investors as names rally.
Threat level: The dominance of retail investor activity in the stock market "makes the inevitable break sharper," Paul Kredosky, venture capitalist and MIT research fellow, tells Axios.
- "It puts a floor for now," he says, because dip buying prevents what could turn into larger selloffs, but when that pattern breaks, "the break becomes sharper and less rational," he notes, adding a drawdown could be twice as bad if dip buyers never come in to stop it.
- Mazzola says option activity among retail investors indicates that the group still feels bullish, while Wall Street buying puts to protect on the downside last week indicates some jitters.
The bottom line: The "dip buying continues" for retail, he says.
