By Tim Courtney, Chief Investment Officer
One of the most consistent trends this year is how active and resilient retail investors have been. When stocks sold off in early April after new tariffs were announced, individual investors bought $4.7 billion in stocks and ETFs that day, the highest single-day total on record.¹ By the end of that week, flows reached $30 billion.² And over the first half of 2025, retail investors added $1.55 trillion to U.S. markets.² Their trading now makes up 20-35% of daily market volume, almost twice what it was ten years ago.³
Going back to late 2021, when inflation began to spike, consumer sentiment surveys continued to produce very low scores.⁴ Still, retail investors have been extremely bullish and have largely used temporary pullbacks as opportunities to buy.⁵ With inflation moderating and the economy avoiding recession, investor optimism has continued through 2023, 2024, and now into this year. ⁶
This optimism has turned even brief downturns into a buy signal. On average, retail investors have added about $1 billion for every 1% drop in the S&P 500.⁷ That kind of consistency has helped stabilize markets and, in some areas, drive prices higher and higher. Since April, buyers in the Nasdaq 100 have earned approximately 31%. ⁸
“Buying the dip”, as it has come to be known, can be a valid and effective strategy. It encourages investors to put capital to work at lower prices (higher expected returns, all things being equal) and takes advantage of market volatility while rebalancing their portfolio.
In the absence of severe market drawdowns, though, retail investors have moved well past buying the dip and into riskier behavior. Margin usage hit record highs in August. ⁹ Interest in what would be considered speculative investments- i.e., investments that produce little to no cash flows relative to their price is very high with AI-related stocks standing out in particular. ¹⁰ It is not uncommon today to find AI-related stocks trading at 50-, 75-, or 100-times sales. These are nose-bleed numbers that historically have meant disaster for investors. But buying continues.
Buying the dip, which has traditionally been seen as a disciplined strategy, has become popular among retail investors at a time when there seems to be little discipline in several areas of the market. Optimism is high, so there are buyers of the dip, the sideways, and the rise, often regardless of the price.
It is important to remain disciplined during all market cycles, including those in which investor confidence is high. Retail flows, which have helped with smooth price changes over the last several years, can also reverse if markets experience something more than a minor correction. The old saying is that in bear markets, stocks return to their rightful owners – those truly disciplined enough to buy and hold through the minor and major dips.
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S&P 500® Index (S&P 500®) is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and covers approximately 80% of available market capitalization.
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