Money-Losing Retail Crowd Keeps Buying Stocks as Market Teeters

(Bloomberg) — In a stock market battered by trade turmoil and growing fears of an economic slowdown, retail investors are doubling down, undeterred as their losses mount.

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Individual traders pumped more than $12 billion into US equities in the week ending March 19, retail-trading data from JPMorgan Chase & Co. showed. The pace of buying was significantly higher than the group’s 12-month average, according to Emma Wu, a global equity derivatives strategist at the bank.

Market watchers keep a close eye on retail traders as they are often the last to cut their exposure to stocks, so the latest bout of aggressive buying from mom-and-pop investors may suggest that equities haven’t found the bottom yet.

The recent behavior of individual investors is characteristic of a “down” year in the stock market, Wu said. It was also seen in 2022, she noted. That’s when the equity benchmark sank 19%, the only down year of the past six. “This is a hallmark of their ‘buy-the-dip’ mentality,” Wu said.

Wu estimates that the group is now nursing a 7% loss for the year, while the S&P 500 has dropped 3.7% through Thursday’s close. The benchmark fell as much as 1.1% by 11 a.m. Friday in New York, after forecasts from some major American corporates like FedEx Corp., Nike Inc., Micron Technology Inc. and Lennar Corp. added to the broader uncertainty around tariffs and economic growth.

When the broader market started to sell off sharply in late February, retail traders remained avid buyers, marking a sharp divergence from institutional buyers, who rotated out of US stocks at a record pace.

A Friday report from Bank of America Corp. found that both its institutional and private clients bought stocks at a rapid pace in the week through Wednesday, with global stock funds recording about $43.4 billion in inflows — the largest amount this year.

The signal from the retail crowd punctuates the increasingly bearish view Wall Street is taking. Strategists from Goldman Sachs Group Inc., Citigroup Inc. and HSBC Holdings Plc all reined in their expectations for US equities in the past two weeks. Morgan Stanley’s Michael Wilson told Bloomberg Television on Thursday that there would be no new highs for the US stock market in the first half of the year.