AJ Bell DIY investors used the sharp market sell-off to buy investments at cheaper prices, continuing a pattern seen during previous periods of market weakness.
Tech shares fell hard after the US midterm election results pointed to a potential slowdown in the pace of the AI infrastructure rollout, particularly data centres, and a higher chance that the US will look to regulate AI in some form. Both suggest headwinds for what’s been a rapid growth story in the past few years.
This market sell-off created ‘money off’ signs galore as shares fell fast in the US on 5 November which then triggered a global market sell-off the day after, with losses seen across all kinds of equities and even gold which is often a go-to asset in troubled times, suggesting an element of investors selling indiscriminately.
The weekend appears to have given investors time to take stock of events, as markets moved higher on 9 November, but the activity among AJ Bell DIY investors in the eye of the storm showed that many don’t sit on their hands when market sell-offs dampen prices of some of the most prominent stocks and funds.
Most popular stocks as investors go bargain hunting
With the dust having settled on the electric shock that triggered large market declines, we’ve looked at AJ Bell customer trading data to spot any trends across the two days of market turmoil and one subsequent trading day of recovery (5 to 9 November inclusive).
Nvidia was the most popular stock bought across ISAs, SIPPs (self-invested personal pensions) and dealing accounts, based on net buys. The company suffered a double whammy, with the tech sell-off compounded by chief executive Jensen Huang being embroiled in an alleged spy scandal. Investors might have taken the view that the company can navigate a path out of the situation.
SpaceX was the second most popular stock in the day period that encompassed the market sell-off and initial rebound. Its shares have been beaten up in the tech rout partially because of chief executive Elon Musk’s political involvements and how that could work against him following the Democrat blue sweep in the US midterm elections.
SpaceX and Musk’s other listed company, Tesla, both fell hard during the market shock, partly owing to suspicions that Musk’s DOGE government cost-cutting campaign may prompt some Democrats to seek a form of payback.
Other potential reasons for the sharp falls include Musk having actively funded the Republicans during this campaign, and primarily because Texas has a new Democrat Senator. That state is home to the headquarters and a lot of the facilities of both Tesla and SpaceX, including the planned Colossus 3 data centre. Investors buying shares in SpaceX might have taken the view that Musk’s plans won’t be derailed by any political backlash.
Alphabet was another popular stock among AJ Bell DIY investors during the market turmoil. It’s possible that if the Democrats do crack down on data centre construction, amid concerns about the amount of power and water required, companies who already have data centres might be in a better position. That could explain why Alphabet was in demand by investors buying on the dip.
It’s worth noting Nvidia and SpaceX were already among the most widely held shares with AJ Bell DIY investors, meaning that demand hasn’t suddenly come out of nowhere for these names.
Most popular funds
Investing is about taking a long-term view and not trying to second guess what will happen in the short term. Those buying tech stocks amid the market carnage could be taking a view that certain names have been oversold and might be worth much more in the future.
There was evidence that plenty of investors also adopted a ‘keep calm and carry on’ approach with funds.
The most popular funds and ETFs during the market turmoil and rebound were a mix of global tracker funds – HSBC FTSE All World Index and Vanguard FTSE All World – and an active global stock picker, Rathbone Global Opportunities.
These are the types of funds that investors regularly buy each month, and the market sell-off may have encouraged them to add a little bit more while prices were looking more attractive.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...