Barclays concluded there was no clear relationship between Robinhood customers adding shares and S&P 500 index moves.
Retail investors using the popular trading app Robinhood have not driven the market’s recent rally, and in fact, their top stock picks have had lower returns, according to a recent analysis by Barclays.
Barclays used Robintrack data to analyze customer holdings and compared the top stock picks and their closing prices.
The analysis found that in aggregate, there is no clear relationship between Robinhood customers adding shares and S&P 500 index performance, according to the Friday note.
“That by itself casts doubt on the idea that retail holdings are the cause of market returns,” wrote analyst Ryan Preclaw.
A flood of new retail investors into brokers like Robinhood, Charles Schwab and TD Ameritrade, alongside the market’s major rebound from the depths of its March low has developed into a popular narrative that new retail trades are driving the rally.
The Silicon-Valley start-up said it saw a historic 3 million new accounts in the first quarter, while stocks experienced their fastest bear market and worst first quarter on record.
Zero commissions, fractional trading and a lack of sports have also driven some young investors into the market.
Preclaw said that just because more Robinhood clients buy into Amazon and the e-commerce giant’s stock rises, doesn’t mean the e-broker presence it driving the stock.
“Just because two things happen at the same time doesn’t mean one causes the other,” said Preclaw. “And while it’s true that many high-return stocks have had a substantial increase in retail ownership, low-return stocks have also had a big increase.”
The most bought stocks on the free-trading app over the past 24 hours were all in the red Thursday, according to RobinTrack, when the Dow violently plunged more than 1,800 points.
Delta Airlines lost more than 14% on Thursday as Robinhood traders bought up shares. To be sure, the airline is up 9% in premarket trading on Friday.
CNBC’s Jim Cramer speculates that Wall Street pros may be buying Robinhood favored stocks in the premarket and then selling them to retail investors who buy during market hours.
“Here’s what they do, they buy in the early morning and then they flip it to Robin Hood types when the market opens and they make money. It’s a game,” said Cramer.