Bullish retail traders are the biggest force behind the stock market's latest rally to all-time highs
Retail traders have been on a dip-buying frenzy since President Donald Trump announced his tariffs in April. Analysts at Barclays estimated that retail traders ploughed around $50 billion into global stocks in the last month.
Stock-buying among institutional investors has paled by comparison, with hedge fund re-risking remaining "modest" and their long positions in US stocks remaining below the long-term median, the bank said on Tuesday.
The data suggests retail investors are largely driving the red-hot rally to record highs. The S&P 500, which weathered a historic sell-off in early April, is now up 26% from its low on April 8.
"In retrospect, 'Liberation day' ushered in historic retail-driven ' buy-the-dip,'" analysts wrote.
Wall Street has been keeping a close eye on the swelling appetite for US stocks among retail traders.
In a note to clients this month, JPMorgan estimated that retail investors purchased a net $270 billion worth of stocks over the first half of the year. The bank added that it sees retail traders buying another $360 billion worth of stocks through the end of 2025, which could push the S&P 500 higher by 5%-10%.
A separate analysis from Vanda Research estimated that cumulative retail net purchases of stocks and exchange-traded funds hit $155.3 billion in the first six months. That's the largest inflow over the first half of the year in at least the last 10 years, the firm said in a note.
"Portfolio health is likely a strong factor behind elevated retail participation so far in Q2," Vanda Research's Ianchini wrote in a separate note last week. "That, plus a successful dip-buying effort in April, and a still-OK labor market may help explain why mom-and-pop traders remain a resilient source of demand for equities in 2025."
According to an eToro survey conducted in May, 61% of retail investors say they're dip-buyers, with the majority buying into the market once it drops 18% or more.
In particular, younger traders said they were most likely to change their investing strategy when the market was turbulent, with 91% of Gen Z investors and 87% of millennials saying that they react when volatility increases.
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