Retail investors are less confident about buying when the US stock market weakens
Retail investors are showing signs of waning confidence in the U.S. stock market’s ability to recover, with market data and analysts’ observations showing waning enthusiasm for dip buying.
Individual investors have been an important factor behind the market’s rally this year, helping it bounce back from a sell-off and pushing it to a series of record highs.
But as the market has slumped since the start of this month and pulled back from its recent peak, investors have shown less inclination to invest on tough days, analysts said.
“Of course, the slogan ‘buy the dips’ still has a lot of support on social media channels, but investors are paying more attention to questions about valuation or whether we are in an AI bubble,” said James St. Aubin, chief investment officer of Ocean Park Asset Management.
Retail participation in the market has become increasingly important since the COVID-19 outbreak in 2020, when more and more quarantined investors focused on their portfolios.
Over the past two years, market analysts and traders have also repeatedly emphasized that retail investors’ buying action when prices fall is the main source of resilience when markets experience shocks.
Vanda Research, in reports published this week and in late October, said its analysis of trade data showed that retail investors were no longer showing the high level of confidence that had fueled massive market rallies this year, such as the surge that followed the “tariff rampage” in April.
“Cracks are starting to appear in this trend,” the company’s analysts said in VandaTrack’s latest report, published last Wednesday. The day before, Vanda said, buying by individual investors was the weakest recorded since May and the third weakest day in 2025.
The company started detecting early warning signals even earlier than that, said Viraj Patel, deputy head of research at Vanda.
Over the summer, he watched as individuals began to direct more of their purchases toward more speculative stocks, ranging from uranium mining companies and smaller bitcoin treasury companies to quantum computing stocks and meme stocks.
“The real defensive sign for us came in September, when we saw a pullback in individual stock purchases overall and into the broad ETF market,” such as the SPDR S&P 500 Trust SPY or Invesco QQQ Trust QQQ, Patel said.
Then, last weekend, Vanda saw investors also starting to reduce purchases of funds traded on the exchange. Traditionally, ETFs serve as a kind of safety blanket for investors in times of greater anxiety.
Other companies have seen signs of a similar decline in enthusiasm among retail investors since the start of November.
BofA Securities said in a report published on Wednesday that despite enthusiasm for broad-market ETF buying in the previous week, all of the activity came from institutions. In contrast, individual retail investors “became net sellers for the first time since late September.”
However, some analysts said they were not ready to issue warnings regarding the attitudes or behavior of retail investors.
Charles Schwab’s trading and asset management platform SCHW has detected a slightly higher level of caution among retail investors, although its sentiment tracker remains in positive territory, said Joe Mazzola, head of trading and derivatives strategy.
“Retail interest in buying during the downturn has moderated this month, but it is still a factor,” he told Reuters.
However, analysts remain focused on monitoring retail investor sentiment and its direction.
“Without their support, any recovery will be more difficult,” said Adam Hetts, head of multi-asset investments at Janus Henderson.
Source: Reuters
