Despite a rocky start to 2025, with U.S. trade wars breeding uncertainty in stock markets, retail traders are aggressively investing in U.S. stocks, injecting $67 billion into equities and exchange-traded funds (ETFs) this year, according to data from VandaTrack. This surge persists even as professional money managers scale back, wary of market turbulence fueled by former President Donald Trump’s unpredictable tariff policies and the rise of Chinese AI start-up DeepSeek.
Individual Investors Stay Optimistic
Retail investors remain undeterred by a 2% drop in the S&P 500 and an 8% decline in the tech sector year-to-date. Their strategy buying the dip has been a winning play for four of the past five years, as noted by Steve Sosnick, chief market strategist at Interactive Brokers: “Dip-buying has been an essentially foolproof strategy.” This confidence is evident online, with Reddit’s Wall Street Bets users rallying around the mantra, “respect the dip, be the dip, BUY THE DIP!”
Institutional investors Retreat
While retail traders seize opportunities, institutional investors are pulling back. Bank of America reports that big investors made their largest-ever reduction in U.S. equity allocations in March. Goldman Sachs data highlights the contrast: retail investors have been net sellers on just seven days this year, despite 25 days of S&P 500 declines. Meanwhile, Monday’s 1.8% rebound in the S&P 500 driven by hopes Trump might soften his tariff stance underscores retail’s focus on capitalizing on dips.
Targeting Big Names
Retail enthusiasm is concentrated on familiar giants like Tesla and Nvidia, both of which have taken significant hits in 2025 after years of strong gains. Last week, retail traders snapped up $3.2 billion in Tesla shares and $1.9 billion in Nvidia shares, per JPMorgan Chase data.
Demand for leveraged ETFs that double these stocks’ movements remains robust, reflecting retail’s risk appetite. “Retail investors tend to go for well-known names,” explains Dhruv Aggarwal, an assistant professor at Northwestern Pritzker School of Law.
Some institutional investors see this retail surge as a red flag. Bernstein analyst Aleksander Peterc draws a historical parallel: “In 1999, when my housekeeper asked about stocks, that’s when things unraveled.” The implication? Unbridled retail buying could hint at an overheated market.
As the U.S. stock market grapples with uncertainty, retail traders are betting big on dips, unfazed by professional caution. With $67 billion already invested in 2025, down slightly from $71 billion in Q4 2024, their influence is undeniable. Whether this boldness pays off or signals trouble remains an open question.
