When the market fell, retail investors saw buying opportunities.
In the first five trading days of August, the S&P 500 fell about 5.9%, the Nasdaq Composite fell nearly 8%, and the Dow Jones Industrial Average fell 5.1%.
The latest sell-off followed two weeks of consecutive declines for the S&P 500 and Nasdaq, though retail investors remained undeterred.
Vanda Research’s data showed that retail investors were actively buying in the market turmoil at the start of August, a buying pattern that broke the relative quiet of the second quarter and showed a strong desire to “buy the dip” when stocks fell.
Vanda Research also noted that the summer is typically a relatively quiet time for retail activity, making the buying more notable.
So what were these retail traders buying? According to Vanda’s data, retail investors tended to buy individual stocks rather than ETFs, especially in the tech sector, which is also consistent with the trend of more tech exposure in retail portfolios.
In the past few weeks, the tech sector has been hit hard, with the “Big Seven” in a correction and the Nasdaq following suit. Thus, the uptick in retail volume more strongly suggests the presence of buying the dip. Nvidia (NVDA.US) and other semiconductor stocks benefited from retail buying.
Meanwhile, the trading activity in the SPDR S&P 500 ETF (SPY.US), one of the most popular retail market tracking ETFs, was relatively quiet. Although there was an uptick in August, the net buying of SPY by retail investors was still far below the levels of the past two years.
Notably, one ETF that has started to attract retail attention is the iShares 20+ Years US Treasury ETF (TLT.US). This may suggest that retail investors are looking to lock in high bond yields before the Fed starts cutting rates by buying long-term Treasuries.