After powering much of 2025’s rally and pushing markets to record highs, retail investors are finally showing hesitation. New data reveals a noticeable drop in dip-buying activity as volatility returns and valuations look increasingly stretched.
🔻 What’s Happening?
- Markets have pulled back from recent peaks since early November.
- Retail investors — historically fast to buy dips — are slowing down their participation.
- Analysts highlight valuation concerns and growing anxiety about a potential AI bubble.
📊 Key Data Points
- Vanda Research reports the weakest retail buying day since May, and the third-weakest day of 2025.
- Retail inflows into individual stocks fell sharply beginning in September.
- Buying shifted first into broad-market ETFs (SPY, QQQ), then even ETF buying slowed last week.
- BofA Securities confirms: retail investors were net sellers for the first time since September — while institutions were the only buyers of ETFs.
🧭 What It Signals
- Retail enthusiasm — a critical force in past rebounds — is losing conviction.
- Defensive behavior is rising:
- Moving from single stocks → ETFs
- From ETFs → cash or reduced exposure
- Speculative pockets (uranium miners, small crypto-linked stocks, quantum computing) saw brief attention, but broad risk appetite is fading.
⚠️ Why It Matters
Retail investors helped stabilize markets over the past two years. A slowdown in their buying:
- weakens market bounce potential
- increases vulnerability to deeper corrections
- signals shifting sentiment in AI, tech, and high-multiple equities
As volatility returns, the market narrative may be shifting from “buy every dip” to “wait and see.”