Retail investors reap big gains from ‘buying the dip’ in US stocks

Keep knowledgeable with free updatesSimply signal as much as the US equities myFT Digest — delivered on to your inbox.Retail merchants “shopping for the dip” in US shares this yr have racked up the most important earnings because the early phases of the Covid-19 disaster, serving to to gas a rally that has pushed Wall Road equities to document highs.Particular person buyers have poured a document $155bn into US shares and change traded funds throughout 2025, based on knowledge supplier VandaTrack, surpassing the meme-stock increase of 2021. They continued to purchase at the same time as President Donald Trump’s blitz of tariffs on US buying and selling companions despatched inventory markets tumbling in April — and their religion within the time-honoured technique of piling in after shares fall in anticipation of a rebound has paid off.The Nasdaq 100 index of large-cap US expertise shares has risen 7.8 per cent this yr. However an investor who purchased the index solely when it had fallen in the course of the earlier buying and selling session would have locked in a cumulative return of 31 per cent over the identical interval, based on evaluation by the Financial institution of America. “Pops and drops will happen . . . however the dip-buying perception has change into the brand new faith,” stated Mike Zigmont, co-head of buying and selling and analysis at Visdom Funding Group. The behavior of shopping for into inventory weak point has change into more and more hard-wired into buyers within the decade and a half of buoyant US markets that adopted the 2008-09 world monetary disaster, throughout which downturns have tended to be shortlived.This yr’s returns are one of the best for the BoA’s hypothetical dip-buying mannequin at this stage of the yr since early 2020, and the second greatest return in knowledge going again to 1985. Vanda’s senior vice-president of analysis Marco Iachini stated “retail buyers stay a significant power available in the market” and that their “dip-buying bias is absolutely intact”.Some content material couldn’t load. Verify your web connection or browser settings.The rebound in US shares — which hit contemporary all-time highs final week even because the greenback and US Treasuries stay underneath strain — has been “powered by a buy-the-dip dynamic that by some metrics has been even stronger than that seen within the latter phases of the 90s tech bubble,” stated BofA fairness analyst Vittoria Volta. Skilled buyers have eyed the rally with warning as a consequence of lingering considerations over the impression of Trump’s landmark tax and spending invoice on America’s nationwide debt and the potential hit to US financial development from his tariffs. Deutsche Financial institution strategists stated this week that there had been “few indicators of robust bullish sentiment and threat urge for food” amongst institutional buyers since their demand peaked within the first few months of this yr. However dip-buyers are enjoying a dangerous recreation by opting to not money out when costs surge, based on Rob Arnott, chair of asset administration group Analysis Associates. “We’ve got a president who likes to shock individuals, who likes to maintain individuals off steadiness, to confuse his adversaries. All of this can be a recipe for the next volatility regime, and better volatility means shopping for low and promoting excessive is extra worthwhile than in trending markets with secure coverage,” Arnott stated. “Dip-buying works brilliantly till it doesn’t,” he added. “When you might have a meltdown, it’s a fast path to deep remorse.”