Join        Login             Stock Quote

Trading Volume's Disappearing Act

 March 09, 2012 11:27 AM

To have a thriving market, you need a healthy number of buyers and sellers. At the local farmer's market, you need farmers to grow the tomatoes, lettuce and zucchini and shoppers to buy the produce. Likewise, eBay wouldn't be the world's leading ecommerce company without the millions of people who buy or sell goods online.

What do investors in the stock market need? Trading volume.

After daily trading volumes in the S&P 500 Index hit a high in July 2002, volume quickly declined before leveling off, bouncing between 20 and 30 billion shares on a daily basis for a few years. Since its January 2009 high, daily shares traded have quickly spiraled downward. Today, volume is at a 15-year low, with only 7 billion shares traded.

[Related -The April 29 Gold Triangle Breakout Update]

Business Insider recently noted how light trading has become, with a "spectacular rally year to date" but "basically no market volume," suggesting that there might not be any interest in actively trading these days.

Investor interest in U.S. markets seems to have eroded as more than $130 billion was withdrawn from equity mutual funds in 2011. Despite the fact that the S&P 500 experienced the best two-month start in more than 20 years, many have continued to temper their excitement.

[Related -Sell In May, But It Is A Presidential Election Year]

In a previous posting, I talked about this feeling of apathy that has stricken investors, which I believe has been driven by a lack of political leadership, excessive regulations and market volatility. When The Economist tackled the issue of U.S. regulations, the magazine pointed out that excessive and badly written rules have negatively affected businesses as they attempt to understand and comply with the rules.

In the chart above, look at the periods that trading volume plummeted. Around the same time in 2002, Sarbanes-Oxley went into effect. In 2010, the Volcker Rule and Dodd-Frank were rolled out. The Economist warns its readers that regulations are suffocating America; they may also be suffocating equity trading.

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. None of U.S. Global Investors Funds held any of the securities mentioned in this post as of 12/31/2011.

By clicking the link above, you will be directed to a third-party website. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for its content.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.



Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageTackling China's Debt Problem: Can Debt-Equity Conversions Help?

China’s high and rising corporate debt problem and how best to address it has received much attention read on...

article imageWill Job Growth Kill The Bear-Market Signal For Stocks?

It’s all about jobs now. Actually, it’s always been about jobs. But the stakes are even higher—perhaps more read on...

article imageAutomating Ourselves To Unemployment

In this current era of central planning, malincentives abound. We raced to frack as fast we could for the read on...

article imageFed: Waiting For June… Or Godot?

The Federal Reserve left interest rates unchanged yesterday, as widely expected. But the possibility of a read on...

Popular Articles

Daily Sector Scan
Partner Center

Related Articles:

Why We're So Unhealthy
More Articles on: Finance

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.