As Wall Street Retreats, Retail Investors Buy the Dip

Wall Street’s panic cycle is retail investors’ opportunity cycle.

As institutional investors execute a historic rotation out of US equities, average Joes are jumping on the chance to, as the parlance goes, buy the dip — and so far have poured $67 billion into battered US stocks, according to VandaTrack data seen by the Financial Times. In other words: the Redditors are at it again.

Dip or Flop

With stagflation on the mind, institutional investors are dumping US stocks at a record pace. In fact, a recent Bank of America survey of global fund investors found that the period between March 7 and 13 marked the single-largest ever move away from US equities — as investors rotated into the eurozone and emerging markets equities. Nearly 70% of investors said the time of US equities outperforming the rest of the world has “peaked,” while 71% said they foresee stagflation in the next 12 months.

Those are big scary words, but the retail crowd doesn’t seem to care. Net inflows of $67 billion into US equities and ETFs in the first quarter of 2025 are down just slightly from the $71 billion seen in the final quarter of 2024, according to the VandaTrack data seen by the FT. As the market teetered toward meltdown mode, retail investors poured $12 billion into US equities in the week ending March 19 alone, according to JPMorgan data seen by Bloomberg, a significantly higher pace than the average week over the previous year.

Returns for the cohort this year probably haven’t been all that great, unsurprisingly — but buyers still have at least some reason to believe the strategy will pay off:

• On Thursday last week, JPMorgan global equity derivatives strategist Emma Wu told Bloomberg she estimates retail investors have seen a 7% loss so far this year, compared with the S&P 500’s 3.7% decline on the year through market close Thursday. Since then, however, the S&P 500 has climbed nearly 2.4% as US equities rebounded on hopes that the government softens promised tariffs planned for April 2.
• It’s the kind of rebound retail investors were hoping for — and are accustomed to, in times of such market downturns. In fact, the last time retail investors poured this heavily into US equities was 2022, the only year in the past six that the S&P 500 had finished in the red, dropping roughly 18%.

Then and Now: “Dip-buying has been an essentially foolproof strategy for four of the past five years,” Steve Sosnick, chief market strategist of retail investing platform Interactive Brokers, told the FT. But not all dips are made equally — and Goldman Sachs analysts have recently pointed out what makes this year’s rotation unique. “While equity market corrections are historically not that uncommon, a coincident dollar sell-off is — especially when equities rapidly reprice,” the investment bank wrote in a note to clients this week. So far this year, the US Dollar Index is down nearly 4%; the index climbed roughly 6% through 2022.