This year, retail investors have been actively buying U.S. stocks, maintaining their confidence even as professional fund managers seek safer options. According to JPMorgan's strategist Emma Wu, since April 2, retail investors have poured over $30 billion into U.S. stocks and ETFs. A popular strategy among these investors is "buying the dip." On a recent Monday, when the S&P 500 fell by 2.4%, retail investors purchased over $3 billion in stocks, marking the 14th such occurrence this year and the fifth since April 2.
Despite a rebound in the S&P 500 on subsequent days, the index has dropped about 4% since the announcement of "reciprocal tariffs" by the U.S. president on April 2. The market has experienced significant volatility, with the S&P 500 seeing five days of over 2% declines and two days of over 2% gains in just 14 trading days. This volatility makes it challenging to assess retail investors' performance, as it largely depends on their market entry and exit timing.
Long-term trends show U.S. major indices generally rising, but there are periods, such as the dot-com bubble, where investors struggled to break even. Kevin Jestice of Nationwide Financial suggests that those with long-term investment plans can remain calm and enter the market during downturns.
JPMorgan's data reveals that 60% of retail funds have gone into individual stocks, with Tesla (TSLA, Financial) and Nvidia (NVDA) accounting for nearly half of this, while 40% has flowed into ETFs. Large tech companies, particularly Tesla, continue to be favored by retail investors. Platforms like Reddit showcase this "faith-based" investment approach in major tech stocks, including the "Magnificent Seven": Tesla, Nvidia, Apple, Microsoft, Amazon, Alphabet, and Meta.
Market experts note that current retail buying is not a mere repeat of pandemic-era exuberance. Kevin Jestice highlights that U.S. employees' retirement accounts, funded regularly through payroll deductions, ensure continuous stock purchases regardless of market conditions. As of December 31, 2023, Americans' retirement assets totaled $44 trillion, with $1.7 trillion in IRAs and $8.9 trillion in 401(k) plans.
