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Retail investors show signs of caution, altering market

dynamics

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Vanda Research notes reduced conviction in market rallies

among

retail investors

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BofA Securities says retail investors were net sellers for

first

time since late September

By Suzanne McGee

Nov 17 (Reuters) - Retail investors are showing signs of

waning confidence in the U.S. stock market's ability to rebound,

with market data and analysts' observations both indicating an

ebb in their enthusiasm about buying dips.

Individual investors have been an important factor behind this

year's market rally, helping it to bounce back from selloffs and

powering it to a string of record highs.

But as the market has lurched downwards since the start of this

month and pulled back from its recent peaks, investors have

shown less propensity to invest on down days, analysts said.

"Sure, the whole 'buy the dip' mantra still has a lot of

support out there on social media channels, but investors are

paying more attention to questions about valuations or whether

we're in an AI bubble," said James St. Aubin, chief investment

officer of Ocean Park Asset Management.

Retail participation in the market has become

increasingly important since the COVID-19 outbreak in 2020, when

growing numbers of quarantined investors focused on their

portfolios.

Over the last two years, market analysts and traders

have also pointed repeatedly to buying on dips by retail

investors as a major source of resilience whenever the market

has hit bumps.

Vanda Research, in reports published this week and at the

end of October, said its analysis of trading data suggests that

retail investors are no longer demonstrating the high level of

conviction that has fueled big market rallies this year, such as

the bounce that followed April's "tariff tantrum."

"Cracks are beginning to emerge in this trend," the firm's

analysts said in the most recent VandaTrack report, published

last Wednesday. The day before that, Vanda said, buying by

individual investors was the weakest recorded since May and the

third-weakest single day of 2025.

The firm began picking up early warning signals even earlier

than that, said Viraj Patel, deputy head of research at Vanda.

Throughout the summer, he watched as individuals began

steering more of their buying to more speculative stocks,

ranging from uranium mining companies and smaller bitcoin

treasury companies to quantum computing stocks and meme stocks.

"The real defensive tell for us came in September, when we

saw a pullback in the buying of individual stocks altogether and

into broad market ETFs," such as the SPDR S&P 500 Trust

or the Invesco QQQ Trust, Patel said.

Then, late last week, Vanda saw investors begin to scale back

their purchases of those exchange-traded funds as well.

Traditionally, ETFs have functioned as a kind of safety blanket

for investors in times of greater anxiety.

Other firms have spotted the same signs of diminished

enthusiasm among retail investors since the beginning of

November.

BofA Securities said in a report published Wednesday that

while it had seen enthusiastic buying of broad market ETFs in

the preceding week, all of that activity had come from

institutions. In contrast, individual retail investors "were net

sellers for the first time since the end of September."

Some analysts, however, said they were not ready to sound

the alarm about retail investor attitudes or behavior.

Trading and asset management platform Charles Schwab ( SCHW )

has detected a slightly higher degree of caution among

retail investors, although its proprietary sentiment tracker

remains in positive territory, said Joe Mazzola, head of trading

and derivatives strategist.

"Retail interest in buying the dip is moderating so far this

month, but it is still a factor," he told Reuters.

But analysts remained focused on monitoring retail investor

sentiment and the direction in which it may be heading.

"Without their support, any rebound becomes more difficult,"

said Adam Hetts, head of multi-asset investing at Janus

Henderson.